How to clean up the banking system...

[Andylusion]

Of all the problems with America's banking system, OP mentions those?

How about we take away the casino aspect of our deposit institutions? I'd prefer a highly regulated deposit banking system like Canada and a robust commercial finance industry that gets the tougher deals done.

I'm confused by that statement. You want a highly regulated deposit banking system like Canada?

The banking system in Canada is by every possible measure, less regulated.

They have lower capitalization requirements. Lower LTV ratios. Lower over all regulation. Lower oversight.

And they have less 'consumer protection' policies in Canada. For example, if you take out loans, there is no bankruptcy. You can't file bankruptcy. You have to pay it back. Period. You must pay back those loans. There is no file chapter 7, and walk away. You can't wipe out your credit card debt.

If the Canadian banks were subjected to American Banking laws, they would all be closed.

Let me just give you one example:

This is capital reserves. The amount of reserve capital banks hold, compared to the total value of the loan. US banks are required to have tons of capital, relative to the value of the loan. 5.5% to 8.5%.

Now look at the Canadian banks. Most of them do not even hold 1% capital compared to the value of the loan.

Canadian banks are far far far less regulated than US banks. Which is exactly why they don't fail. During the Great Depression in the 1930s, Canadian banks didn't have half the regulation of US banks, and didn't have any major bank failures.

Similarly, in 2008, they didn't have nearly as many bank failures as we did.

Regulation does not result in safety and stability. It in fact, is the very cause of instability and crashes.

 

[Jomama]

Andylusion, you're convincing and may be correct. I'll redo my research and admit that this is an old opinion I've been carrying around. I agree that regulation does not result in safety and stability but the guaranteed bailout is the real culprit. I like the easy libertarian answer but never see that surrender of control by our regulators.

 

[Slashsnake]

Of all the problems with America's banking system, OP mentions those?

How about we take away the casino aspect of our deposit institutions? I'd prefer a highly regulated deposit banking system like Canada and a robust commercial finance industry that gets the tougher deals done.

I'm confused by that statement. You want a highly regulated deposit banking system like Canada?

The banking system in Canada is by every possible measure, less regulated.

They have lower capitalization requirements. Lower LTV ratios. Lower over all regulation. Lower oversight.

And they have less 'consumer protection' policies in Canada. For example, if you take out loans, there is no bankruptcy. You can't file bankruptcy. You have to pay it back. Period. You must pay back those loans. There is no file chapter 7, and walk away. You can't wipe out your credit card debt.

If the Canadian banks were subjected to American Banking laws, they would all be closed.

Let me just give you one example:
View attachment 106898

This is capital reserves. The amount of reserve capital banks hold, compared to the total value of the loan. US banks are required to have tons of capital, relative to the value of the loan. 5.5% to 8.5%.

Now look at the Canadian banks. Most of them do not even hold 1% capital compared to the value of the loan.

Canadian banks are far far far less regulated than US banks. Which is exactly why they don't fail. During the Great Depression in the 1930s, Canadian banks didn't have half the regulation of US banks, and didn't have any major bank failures.

Similarly, in 2008, they didn't have nearly as many bank failures as we did.

Regulation does not result in safety and stability. It in fact, is the very cause of instability and crashes.

The Canadian banks, however, actually have contactless cards everywhere and have had EMV chip and PIN for years. It seems obvious Canada has been more serious about it's payment infrastructure, and yes, I'm sure the Canadian government told banks and merchants to comply with this as a regulation.

I think bankruptcy is crap. Taxpayers pay for bankruptcies. Financial institutions should be required to carry insurance for the consumer on loans including personal and credit cards like my credit unions do in order to protect against someone's sudden financial hardship.

Also remember, we call the Canadian banks the "big five" because they actually are too big to fail. The banking system in America consists of way more credit unions and smaller banks.

 

[Andylusion]

Of all the problems with America's banking system, OP mentions those?

How about we take away the casino aspect of our deposit institutions? I'd prefer a highly regulated deposit banking system like Canada and a robust commercial finance industry that gets the tougher deals done.

I'm confused by that statement. You want a highly regulated deposit banking system like Canada?

The banking system in Canada is by every possible measure, less regulated.

They have lower capitalization requirements. Lower LTV ratios. Lower over all regulation. Lower oversight.

And they have less 'consumer protection' policies in Canada. For example, if you take out loans, there is no bankruptcy. You can't file bankruptcy. You have to pay it back. Period. You must pay back those loans. There is no file chapter 7, and walk away. You can't wipe out your credit card debt.

If the Canadian banks were subjected to American Banking laws, they would all be closed.

Let me just give you one example:
View attachment 106898

This is capital reserves. The amount of reserve capital banks hold, compared to the total value of the loan. US banks are required to have tons of capital, relative to the value of the loan. 5.5% to 8.5%.

Now look at the Canadian banks. Most of them do not even hold 1% capital compared to the value of the loan.

Canadian banks are far far far less regulated than US banks. Which is exactly why they don't fail. During the Great Depression in the 1930s, Canadian banks didn't have half the regulation of US banks, and didn't have any major bank failures.

Similarly, in 2008, they didn't have nearly as many bank failures as we did.

Regulation does not result in safety and stability. It in fact, is the very cause of instability and crashes.

The Canadian banks, however, actually have cards everywhere and have had EMV chip and PIN for years. It seems obvious Canada has been more serious about it's payment infrastructure, and yes, I'm sure the Canadian government told banks and merchants to comply with this as a regulation.

I think bankruptcy is crap. Taxpayers pay for bankruptcies. Financial institutions should be required to carry insurance for the consumer on loans including personal and credit cards like my credit unions do in order to protect against someone's sudden financial hardship.

Also remember, we call the Canadian banks the "big five" because they actually are too big to fail. The banking system in America consists of way more credit unions and smaller banks.

I refuse to have contactless cards. That to me, is the height of stupidity.

Contactless cards literally broadcast your information. Now it's true that the average ghetto dog isn't going to be able to clone your card, because it has the chip in it. That's true.

But most of the big card cloning rings, are organized gangs. And organized gangs are going to figure out how to capture that data your card is broadcasting.

Literally you can get a recorder the size of a quarter, stick tape it to the back of one of those card readers, and record the information from every single contactless card that people use at that machine the entire day. Use your mind dude... how do you think that machine is getting your information, if it isn't getting it through metal to metal contacts? You are broadcasting it.

Everyone around you... could.... be getting that broadcast. Why do you think that those card readers are required to be spaced apart a certain distance? Because they were having problems with readers picking up your card from three cash registers over. Well if the readers can pick you up 10 feet away.... everyone else can to.

That guy in the baseball cap, always looking down, and always buying a soda... what do you think he's doing? He's recording those broadcasts.

I won't be using contactless anytime soon. I've seen the weakness of the system, when I was working for Delta Airlines, when they tried to implement it a few years back. It will get better, and I wager in the next 10 years they'll figure it out. My advice, not yet. Stay away from that crap.

Bankruptcy is crap. But the solution isn't insurance. If that was the solution, then we wouldn't be talking about it, because all banks carry insurance. That's not the problem. The problem is bankruptcy itself. We need to adopt the Canadian system and simply not allow bankruptcy.

That will cause people to be more prudent, and less willing to borrow money. Thus they will be less likely to end up in debt to begin with, just like Canadians.

I'm not sure what your point is there, but I don't believe in 'too-big-to-fail'. The biggest bank to fail, outside of the governments Fannie Mae and Freddie Mac, was Lehman Brothers. We let them fail, and they failed, and it wasn't a big deal.

The moment you claim something is 'too-big-to-fail', you are ensuring they will act irresponsibly, because they don't believe you will let them fail, no matter what they do.

 

[Slashsnake]

The height of stupidity? Lol. Being afraid of contactless card is the height of stupidity. Buy an RFID wallet if you're that paranoid. I'm sure you're afraid of RFID cards but will gladly swipe your card even though that's a more insecure payment method. I know, 21st century technology and America just doesn't mix, I get it.

Americans look so stupid when they sit there and punch holes in the RFID chip and flip out over these cards the rest of the world has been using just fine for years. You're covered anyways if your information is stolen by some idiot who "sucks" the info from your card.

 

[Andylusion]

The height of stupidity? Lol. Being afraid of contactless card is the height of stupidity. Buy an RFID wallet if you're that paranoid. I'm sure you're afraid of RFID cards but will gladly swipe your card even though that's a more insecure payment method. I know, 21st century technology and America just doesn't mix, I get it.

Americans look so stupid when they sit there and punch holes in the RFID chip and flip out over these cards the rest of the world has been using just fine for years. You're covered anyways if your information is stolen by some idiot who "sucks" the info from your card.

It's ok with me. Do what you want. I've worked directly with RFID technology, and I'm sorry but anything broadcast over the air, is recordable. If you think I'm paranoid, that's fine. I'm just telling you, I've worked with this technology, and it is very very easy to pick up what your card is transmitting. I've done it. I've physically done it, while working on Delta equipment.

I think it's a bad move. At Delta, all it transmitted with encrypted location information for your luggage. But your credit card, has your account information. That's a bit more sensitive to be broadcasting it.

So back to the Chip Card.

The one thing that has been bugging me about this discussion, is that I know that I read a while back that some of the first modern chip-cards were first deployed in the US, back in the early 2000-2001 time frame.

And yet you are correct the first nation wide roll out, happened in the UK, back in 2004-2005.

So I started looking into why that is.

There are a couple of reasons for this. First, from the vendor and banking perspective, VISA assumes all liability for transactions. Meaning, the bank, and the vendor both, have nothing to lose. If someone conducts a fraudulent transaction, the vendor doesn't care, because they get paid either way. Similarly, bank losses are replaced by VISA, so they lose nothing either way.

VISA eats the cost of fraudulent transactions 100%, so the vendors and banks have no motivation to reduce fraud. Now VISA does require certain precautions that vendors must follow, but beyond the minimum, no one has any motivation for additional vigilance.

As such, no one has been demanding upgraded systems, and security.

Now that of course begs the question, why hasn't the credit card companies demanded it?

Like all financial institutions, most understand there will be some level of fraud that is unavoidable. Until we start shooting people for fraud, people are going to find ways of committing fraud.

So instead they look at the ratios, and the costs. For example, say you lose $4,000 in fraud. It will cost you $5,000 to cut that fraud in half. Do you do it? Not likely. The mount of money you spent would not reduce fraud enough to cover the cost.

Let's say you lose $10,000 to fraud, and it costs you $5,000 to cut that in half. Would you do it? Maybe. But what if you earned $10 Billion a year? Again, not likely, because the amount you earn in profits, makes saving $5,000 a year almost nothing.

The credit card companies are the same way. The US economy is the largest, most wealthy, and obviously most profitable market in the world.

This means the companies make tons of money relative to the fraud, and the cost to reduce fraud would be massive.

See the reasons chip-cards gained acceptance faster in the UK for example, was simply that credit card fraud was higher (relative to the profitability of the market), and the cost to implement was lower.

Just looking at gas station quick-marts, we're talking about hundreds of thousands of credit card readers across this massive country. In the UK, it's a small fraction of that.

Plus the UK's economy is a fraction of ours, so the amount of fraud relative to the size of the market, is much higher. In fact, almost 30% of all people in the UK, say they were victims of credit card fraud. That's massive compared to the US.

So the real bottom line as to why other countries have adopted the EMV chip-cards before the US, is quite simply.... because it was more needed, and easier to implement over there, than here.

Then that of course begs the question, so why did they finally start a nation wide roll out of chip cards in the US?

Well that's because of a dramatic rise in theft from major retailers in 2014. Namely Best Buy and one other major retailer, which I just now forgot.

But the way it works is simple. When the retailer makes too many fraud claims, the credit card companies do a liability shift. Meaning, they no longer cover the loss. Well of course when the retailer starts losing money on fraud, they are forced to do something about it. In comes the demand for more security in transactions. Now they start rolling out chip-cards.

And now we have chip-cards in the US. Whether this will actually reduce fraud is difficult to determine. It should in theory.

 

[Slashsnake]

When a company makes too many fraud claims?

The liability shift in 2015 includes any swiped transaction with a chipped card unless the transaction is:

A) Over the internet or phone
B) At a gas pump
C) At an ATM, which had their own liability shift three months ago.

The fraudulent transaction could be $1 and the merchant would be liable to pay it back as long as an EMV card was swiped.

The liability shift of 2015 is a result of Target, Best Buy, Michael's data breach... But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner... So now what happens? Customers move to credit cards.

 

[Slashsnake]

I meant not all banks are nice about refunding fraudulent debit card transactions quickly.

 

[Andylusion]

When a company makes too many fraud claims?

The liability shift in 2015 includes any swiped transaction with a chipped card unless the transaction is:

A) Over the internet or phone
B) At a gas pump
C) At an ATM, which had their own liability shift three months ago.

The fraudulent transaction could be $1 and the merchant would be liable to pay it back as long as an EMV card was swiped.

The liability shift of 2015 is a result of Target, Best Buy, Michael's data breach... But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner... So now what happens? Customers move to credit cards.

Interesting, but that isn't what I read. As long as they have an EMV credit card swipe, and meet the requirements, if someone commits fraud, the merchant is not liable. VISA or Mastercard (who named that), eat the loss. The merchant loses nothing.

If they do not have the EMV chip-card reader, then they lose the money. If they do not upgrade to chip-card enabled readers, and someone commits card fraud, then the merchant is held liable, because they didn't have the required security.

Before the liability shift, they never suffered loss. The card companies ate the loss.

But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

True.... in 2014. But it wasn't that bad before. Like I said in the prior post, as the fraud costs went up, and the liability shift happened, then the demand for more security came.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner

Well that's a pretty easy thing to say, when you are not the one paying the bill.

When the shoe is on the other foot, you don't see people demanding they themselves pay out the money.

There was a guy who bought a house, and found out it had lead paint, and of course when he has to foot the bill, getting rid of lead paint wasn't as easy as "well he should just fork out the cash for safety...".

Pretty easy to say, when it's not you paying out the cash. Number one thing, every human being should do when considering any argument... put yourself in the place of the person you think 'should do something'.

Now as for "not all banks refund fraudulent credit card transactions"... I have no idea what you are talking about. If you read the VISA policy statements for every VISA card, such as my bank card, VISA covers fraud 100%.

Your bank has nothing to do with it.

Alternatively if you have a bank issued card, that is NOT a credit card (no VISA or Mastercard logo), then it depends on the policy of that specific bank, or credit union. Most though, still cover most fraud. It's possible you have a few somewhere that don't.

 

[Andylusion]

I meant not all banks are nice about refunding fraudulent debit card transactions quickly.

Ah ok. That makes more sense.

There was a mothers debit card that was used, while she was in possession of the card. The police investigation turned up that at the time she was in the house, the daughter left, and returned. Additionally, the camera at the ATM, showed nothing. Whoever got the money must have covered the camera before pulling up to the ATM.

Since the police report mentions the daughter left and came back, at the exact time of the transaction, and the mother still had the card, and because no other questionable transactions ever happened... the bank refused to call it fraud.... which I happen to agree with. I think the daughter stole the money.

Banks, especially smaller banks, can't afford to just refund every claim of fraud, without some evidence. So generally they do have tighter limitations on what they will refund.

The bigger banks tend to be safer in that regard, and I think it's because they are large enough, they have their own fraud investigation department, that looks over what evidence they have, before agreeing to pay it back. Which is why it take a while sometimes.

 

[Slashsnake]

When a company makes too many fraud claims?

The liability shift in 2015 includes any swiped transaction with a chipped card unless the transaction is:

A) Over the internet or phone
B) At a gas pump
C) At an ATM, which had their own liability shift three months ago.

The fraudulent transaction could be $1 and the merchant would be liable to pay it back as long as an EMV card was swiped.

The liability shift of 2015 is a result of Target, Best Buy, Michael's data breach... But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner... So now what happens? Customers move to credit cards.

Interesting, but that isn't what I read. As long as they have an EMV credit card swipe, and meet the requirements, if someone commits fraud, the merchant is not liable. VISA or Mastercard (who named that), eat the loss. The merchant loses nothing.

If they do not have the EMV chip-card reader, then they lose the money. If they do not upgrade to chip-card enabled readers, and someone commits card fraud, then the merchant is held liable, because they didn't have the required security.

Before the liability shift, they never suffered loss. The card companies ate the loss.

But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

True.... in 2014. But it wasn't that bad before. Like I said in the prior post, as the fraud costs went up, and the liability shift happened, then the demand for more security came.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner

Well that's a pretty easy thing to say, when you are not the one paying the bill.

When the shoe is on the other foot, you don't see people demanding they themselves pay out the money.

There was a guy who bought a house, and found out it had lead paint, and of course when he has to foot the bill, getting rid of lead paint wasn't as easy as "well he should just fork out the cash for safety...".

Pretty easy to say, when it's not you paying out the cash. Number one thing, every human being should do when considering any argument... put yourself in the place of the person you think 'should do something'.

Now as for "not all banks refund fraudulent credit card transactions"... I have no idea what you are talking about. If you read the VISA policy statements for every VISA card, such as my bank card, VISA covers fraud 100%.

Your bank has nothing to do with it.

Alternatively if you have a bank issued card, that is NOT a credit card (no VISA or Mastercard logo), then it depends on the policy of that specific bank, or credit union. Most though, still cover most fraud. It's possible you have a few somewhere that don't.

I could walk into Wegmans today with a chipped card owned by someone else with the magnetic stripe cloned or whatever, and just because they have Verifone MX925's doesn't mean they are excused from the liability shift. The chip reader of the terminal needs to be turned on and active before they're covered by either the bank (for not having a chip on the card) or the Visa or whatever. So if I spent $200 at Wegmans today with that card, they'd be out of that money, not the bank or Visa/MasterCard/Discover/AMEX, because they did their part. In fact it kinda pisses me off how stupid their IT department looks... Wegmans has been announcing since early 2014 that they'd have their chip readers activated by October 2015, but since then they've been lying to their customers by pushing the expected date back 3-6 months every time people ask why they've missed their target... "soon" is not three years and counting later, especially since they've had the capable terminals since 2010.

Yes there is the issue with cost regarding the purchase of new terminals; however, these companies were warned way back in 2011 about this liability shift and had four years to save here and there so they had the funds to purchase these terminals. Pizza Hut is an embarrassment for an example... What did they do, spend $5 on the cheap plastic readers that are taped to the side of their screen about 20 years ago? Pizza Hut should've ponied up and saved about a $1 million every quarter for a few years and they could've easily purchased and installed real, wireless card readers that also take contactless in their restaurants.

 

[EdwardBaiamonte]

Anyone have any ideas on how/if America will ever clean up the banking system here? It's old,outdated, the least secure, slow... Does anyone agree with my points below? I think our economy would be better off with a modern banking system.

We're charged for wire transfers, which are basically regular transfers in other countries.. Instant and free, which is the way it should be in America. Instead, banks charge $25 for outgoing transfers, and then the receiving bank charges another $15 for the incoming wire transfer, which is ridiculous. So an American has to fill out a long form, pay $40 and then they can get their money the same business day, whereas it's free and simple in other countries. We could get rid of checks with a more modern system.

We have the worst credit card payment system... We still heavily rely on magnetic stripe technology. In addition to the old mag-stripe, many payment terminals are hidden behind the counter tops which are not accessible to the consumer, so someone else has to touch your card... Unacceptable in my opinion. We rely on "signature authentication" which is also unacceptable. Not only is this worse than PIN, but the merchant doesn't even compare signatures, and many are "digitally captured" which makes them even more worthless.
Add in the fact that outside of HSBC, AMEX, and the Citi Costco, there's virtually no contactless issued cards in the U.S. Currently, merchants are to blame for the lack of chip acceptance everywhere as they're too lazy and cheap to finish terminal certification, and many (like Pizza Hut and Wendy's) haven't even purchased the correct terminals yet.

ATM's charge usage fees. If you're using another bank's ATM, good luck using it for free. In other countries ATM usage is free because the banks actually get along with one another... Which probably is one reason why transfers between banks are almost instant and free. If you're paying your own bank $2.50 to use the ATM while the other bank/ATM owner charges you $3 to use their ATM (totaling $5.50) why would anyone want to use an automated teller machine not owned by their bank?

We still use checks because of point #1 above. I should be able to instantly transfer money to my landlord, not have to pull out the checkbook once a month. Some banks give you set amount of money that day, but others make you wait up to 5 days for a check to clear depending on the amount and the bank. Checks are a target for fraud, just like magnetic stripes.

Our online billing system is a joke. CVV2's hardly work if someone has already stolen your card information from when you dropped it on the ground. We need a standard system that requires the cardholder to confirm online and foreign transactions with a text message reply first. ACH transfers to a biller such as Verizon should be encrypted and instant if done from your bank's website and also the merchant website.

The best way to clean up the banking system is to make it more capitalistic. Its like health care controlled by the govt so very very inefficient.

 

[Manonthestreet]

prosecute crimes instead of just collecting fines

 

[EdwardBaiamonte]

prosecute crimes instead of just collecting fines

impossible without an arbitrary police state! Who would have sent to jail in housing crisis? Greenspan SEC Treasury Secretary 1000's of bank regulators??

 

[Slashsnake]

prosecute crimes instead of just collecting fines

impossible without an arbitrary police state! Who would have sent to jail in housing crisis? Greenspan SEC Treasury Secretary 1000's of bank regulators??

In the latest Wells Fargo example, those executives who pushed for opening accounts and those who opened accounts in others' names without permission should've been charged with fraud and identity theft. Instead they received what is a slap on the wrist for their lifestyle standards.. A millionaire CEO resigned... It doesn't matter, he's still rich and now doesn't have to get up and go to work every day.

 

[Slashsnake]

Anyone have any ideas on how/if America will ever clean up the banking system here? It's old,outdated, the least secure, slow... Does anyone agree with my points below? I think our economy would be better off with a modern banking system.

We're charged for wire transfers, which are basically regular transfers in other countries.. Instant and free, which is the way it should be in America. Instead, banks charge $25 for outgoing transfers, and then the receiving bank charges another $15 for the incoming wire transfer, which is ridiculous. So an American has to fill out a long form, pay $40 and then they can get their money the same business day, whereas it's free and simple in other countries. We could get rid of checks with a more modern system.

We have the worst credit card payment system... We still heavily rely on magnetic stripe technology. In addition to the old mag-stripe, many payment terminals are hidden behind the counter tops which are not accessible to the consumer, so someone else has to touch your card... Unacceptable in my opinion. We rely on "signature authentication" which is also unacceptable. Not only is this worse than PIN, but the merchant doesn't even compare signatures, and many are "digitally captured" which makes them even more worthless.
Add in the fact that outside of HSBC, AMEX, and the Citi Costco, there's virtually no contactless issued cards in the U.S. Currently, merchants are to blame for the lack of chip acceptance everywhere as they're too lazy and cheap to finish terminal certification, and many (like Pizza Hut and Wendy's) haven't even purchased the correct terminals yet.

ATM's charge usage fees. If you're using another bank's ATM, good luck using it for free. In other countries ATM usage is free because the banks actually get along with one another... Which probably is one reason why transfers between banks are almost instant and free. If you're paying your own bank $2.50 to use the ATM while the other bank/ATM owner charges you $3 to use their ATM (totaling $5.50) why would anyone want to use an automated teller machine not owned by their bank?

We still use checks because of point #1 above. I should be able to instantly transfer money to my landlord, not have to pull out the checkbook once a month. Some banks give you set amount of money that day, but others make you wait up to 5 days for a check to clear depending on the amount and the bank. Checks are a target for fraud, just like magnetic stripes.

Our online billing system is a joke. CVV2's hardly work if someone has already stolen your card information from when you dropped it on the ground. We need a standard system that requires the cardholder to confirm online and foreign transactions with a text message reply first. ACH transfers to a biller such as Verizon should be encrypted and instant if done from your bank's website and also the merchant website.

The best way to clean up the banking system is to make it more capitalistic. Its like health care controlled by the govt so very very inefficient.

Every banking system in the world is regulated by its government. The taxpayers have to bail them out when the banks are ready to fail or else the economy collapses inside out. The banking system was poorly regulated before the 2008 crisis. America's banks are the least technologically advanced because there aren't enough regulations. Government should've mandated chip and pin forever ago. Government should've mandated an instant transfer mandate years ago. Government should've taken away checks as a legal payment method years ago.

 

[Andylusion]

Anyone have any ideas on how/if America will ever clean up the banking system here? It's old,outdated, the least secure, slow... Does anyone agree with my points below? I think our economy would be better off with a modern banking system.

We're charged for wire transfers, which are basically regular transfers in other countries.. Instant and free, which is the way it should be in America. Instead, banks charge $25 for outgoing transfers, and then the receiving bank charges another $15 for the incoming wire transfer, which is ridiculous. So an American has to fill out a long form, pay $40 and then they can get their money the same business day, whereas it's free and simple in other countries. We could get rid of checks with a more modern system.

We have the worst credit card payment system... We still heavily rely on magnetic stripe technology. In addition to the old mag-stripe, many payment terminals are hidden behind the counter tops which are not accessible to the consumer, so someone else has to touch your card... Unacceptable in my opinion. We rely on "signature authentication" which is also unacceptable. Not only is this worse than PIN, but the merchant doesn't even compare signatures, and many are "digitally captured" which makes them even more worthless.
Add in the fact that outside of HSBC, AMEX, and the Citi Costco, there's virtually no contactless issued cards in the U.S. Currently, merchants are to blame for the lack of chip acceptance everywhere as they're too lazy and cheap to finish terminal certification, and many (like Pizza Hut and Wendy's) haven't even purchased the correct terminals yet.

ATM's charge usage fees. If you're using another bank's ATM, good luck using it for free. In other countries ATM usage is free because the banks actually get along with one another... Which probably is one reason why transfers between banks are almost instant and free. If you're paying your own bank $2.50 to use the ATM while the other bank/ATM owner charges you $3 to use their ATM (totaling $5.50) why would anyone want to use an automated teller machine not owned by their bank?

We still use checks because of point #1 above. I should be able to instantly transfer money to my landlord, not have to pull out the checkbook once a month. Some banks give you set amount of money that day, but others make you wait up to 5 days for a check to clear depending on the amount and the bank. Checks are a target for fraud, just like magnetic stripes.

Our online billing system is a joke. CVV2's hardly work if someone has already stolen your card information from when you dropped it on the ground. We need a standard system that requires the cardholder to confirm online and foreign transactions with a text message reply first. ACH transfers to a biller such as Verizon should be encrypted and instant if done from your bank's website and also the merchant website.

The best way to clean up the banking system is to make it more capitalistic. Its like health care controlled by the govt so very very inefficient.

Every banking system in the world is regulated by its government. The taxpayers have to bail them out when the banks are ready to fail or else the economy collapses inside out. The banking system was poorly regulated before the 2008 crisis. America's banks are the least technologically advanced because there aren't enough regulations. Government should've mandated chip and pin forever ago. Government should've mandated an instant transfer mandate years ago. Government should've taken away checks as a legal payment method years ago.

I disagree. Every country that has allowed it's banks to fail, has resulted in economic growth, and a more stable banking system.

With, or without regulation, banks that believe they will be bailed out under the myth that if they fail, the entire economy crashes, are automatically more likely to crash because they have less incentive to prepare for a crash.

It's the same as those people who bought homes they had absolutely no ability to pay for, because they knew if everything went south, they could file bankruptcy and have the debt reduced or eliminated. They call this "strategic default". If there was absolutely no bankruptcy whatsoever, like in Canada, then there would be no strategic default, and thus people would be wiser about buying a house on a mortgage.

Banks are the same way. When you guarantee the banks will be bailed out because "if we don't he world will end", then of course the banks are not going to be a prudent.

We know this for a fact. It's not even a debatable point, because in 2005 or 2006, the bank regulators in the UK, met with banks, and asked them what contingency plans they had. When the regulators look at the plans, they were really really small. They started pressing the bank representatives at the meeting about why their plans were so tiny. Eventually they pressed the issues and pressed the issue until one bank rep blurted out that if there was a big crash the government would bail them out, and most would likely lose their jobs anyway.

Did you catch it? The banks knew that people like you would say "The taxpayers have to bail them out when the banks are ready to fail or else the economy collapses inside out."... so.... they banked on that... pardon the pun.

As long as you believe that banks must be bailed out or the implodes, then they are going to react to the incentives you give them. They are going to conduct their business believing they don't need to be cautious, because you will dutifully bail them out, out of fear.

The truth is, banks do not cause the economy to crash. The economy crashing, wipes out the banks. If your business is making money hand over fist, and your bank is wiped out.... why do you think your business would magically fail? It's not logical.

Bank One for example. Bank One was a Columbus Ohio based bank, that crashed in 2004. It no longer exists. Hundreds of thousands of customers were left without banking services.

Did anyone have any problems? No. My company simply switched it's company bank to Chase. Was there some delay in payments? A little.... but nothing that caused any serious company problems. Next thing we knew, we got pay checks from Chase. Not big deal. It didn't harm our customers. Didn't harm us. Didn't harm our suppliers.

Massive bank, wiped out. Nothing happened. Bank One was the 6th largest bank in the country. Last I checked 2004 was a big economic growth time.

 

[EdwardBaiamonte]

Government should've mandated chip and pin forever ago. Government should've mandated an instant transfer mandate years ago. Government should've taken away checks as a legal payment method years ago.

well since govt knows so much why not have them regulate all industries!!!!! What a great idea!!!!

 

[EdwardBaiamonte]

The banking system was poorly regulated before the 2008 crisis.

what???????????????? obviously not according to those who regulated it!! Are you a typical stupid communist who is sure you know what regulations render the system "well regulated"?

Barney Frank: "I hope by next year we'll have abolished Fanny Freddie... it was a great mistake to push lower income people into homes they couldn't afford and couldn't really handle once they had it"

We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though"-Bernanke


"With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly."-Bernanke

 

[Andylusion]

When a company makes too many fraud claims?

The liability shift in 2015 includes any swiped transaction with a chipped card unless the transaction is:

A) Over the internet or phone
B) At a gas pump
C) At an ATM, which had their own liability shift three months ago.

The fraudulent transaction could be $1 and the merchant would be liable to pay it back as long as an EMV card was swiped.

The liability shift of 2015 is a result of Target, Best Buy, Michael's data breach... But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner... So now what happens? Customers move to credit cards.

Interesting, but that isn't what I read. As long as they have an EMV credit card swipe, and meet the requirements, if someone commits fraud, the merchant is not liable. VISA or Mastercard (who named that), eat the loss. The merchant loses nothing.

If they do not have the EMV chip-card reader, then they lose the money. If they do not upgrade to chip-card enabled readers, and someone commits card fraud, then the merchant is held liable, because they didn't have the required security.

Before the liability shift, they never suffered loss. The card companies ate the loss.

But also because we have 25% of the world's credit cards but 50% of the world's credit card fraud.

True.... in 2014. But it wasn't that bad before. Like I said in the prior post, as the fraud costs went up, and the liability shift happened, then the demand for more security came.

Personally I think a customer's information should be safeguarded over profits. Not all bank's refund a customer's fraudulent credit card transactions and fees without a fight and within a timely manner

Well that's a pretty easy thing to say, when you are not the one paying the bill.

When the shoe is on the other foot, you don't see people demanding they themselves pay out the money.

There was a guy who bought a house, and found out it had lead paint, and of course when he has to foot the bill, getting rid of lead paint wasn't as easy as "well he should just fork out the cash for safety...".

Pretty easy to say, when it's not you paying out the cash. Number one thing, every human being should do when considering any argument... put yourself in the place of the person you think 'should do something'.

Now as for "not all banks refund fraudulent credit card transactions"... I have no idea what you are talking about. If you read the VISA policy statements for every VISA card, such as my bank card, VISA covers fraud 100%.

Your bank has nothing to do with it.

Alternatively if you have a bank issued card, that is NOT a credit card (no VISA or Mastercard logo), then it depends on the policy of that specific bank, or credit union. Most though, still cover most fraud. It's possible you have a few somewhere that don't.

I could walk into Wegmans today with a chipped card owned by someone else with the magnetic stripe cloned or whatever, and just because they have Verifone MX925's doesn't mean they are excused from the liability shift. The chip reader of the terminal needs to be turned on and active before they're covered by either the bank (for not having a chip on the card) or the Visa or whatever. So if I spent $200 at Wegmans today with that card, they'd be out of that money, not the bank or Visa/MasterCard/Discover/AMEX, because they did their part. In fact it kinda pisses me off how stupid their IT department looks... Wegmans has been announcing since early 2014 that they'd have their chip readers activated by October 2015, but since then they've been lying to their customers by pushing the expected date back 3-6 months every time people ask why they've missed their target... "soon" is not three years and counting later, especially since they've had the capable terminals since 2010.

Yes there is the issue with cost regarding the purchase of new terminals; however, these companies were warned way back in 2011 about this liability shift and had four years to save here and there so they had the funds to purchase these terminals. Pizza Hut is an embarrassment for an example... What did they do, spend $5 on the cheap plastic readers that are taped to the side of their screen about 20 years ago? Pizza Hut should've ponied up and saved about a $1 million every quarter for a few years and they could've easily purchased and installed real, wireless card readers that also take contactless in their restaurants.

I'm not mad at you, but it really bugs me when people assume that franchise merchant chains are all part of one big company.

They are not. Pizza Hut is a franchise chain. A Franchise is owned by a private owner, that only has the money from the profits of that specific store. Even the company owned stores, are still separate companies. Each store succeeds or fails on it's own profits.

Moreover, the card readers, are all interconnected to the stores Point-Of-Sale system. Meaning that depending on what system they have, replacing all the card readers, may require a complete upgrade the entire system.

Lastly, aside from the cost of hiring professionals to install and upgrade the new POS system, the system itself may require internet capability, which the newer stores in metro areas wouldn't have a problem with, but stores in rural and small towns may. And that would incur an additional monthly expense.

This idea that because Pizza Hut HQ, or Wendy's HQ, or McDonald's HQ has billions of dollars, means that each store is fabulously wealthy, is simply not true.

You walk into a store of any chain, and that store could be on the verge of bankruptcy, while the main company is making billions. I don't know how much the profit margin of a Pizza Hut is, but a Papa Johns is just 6%. That means when you buy a $12 large pizza, they are only making $1 at best. Maybe he has the money to replace all those readers, and maybe not.

But if you think that corporate head quarters is going to pay to have all those machines and POS system throughout all the stores in the country replaced... not going to happen. Each store is it's own company. It has to pay for upgrades on its own.

That said, it would be great if everyone did everything years in advance, but that's not human nature.

I remember watching a news story about welfare reform in the 1990s, and this reporter was interviewing this lady who was getting kicked off welfare. The reporter was asking, how they could possibly survive, with her kids.

She said, they would be better off now, because she'll get a job, and have money to live in a better place.

That stunned the reporter who was on live TV, and she stammered and asked... why didn't she get a job sooner then?

Because she didn't have to.

Point being, people don't often change stuff for the better, until they have no other option. We have phrases for this, that have existed for decades.

"necessity is the mother of invention"

What do you think that means? It means people don't take the time to create something new and better, until they have to. The moment they have no choice but to come up with something better, then suddenly they create something better.

So yes, all these companies knew the liability shift was coming.... and wouldn't it have been create if they had made all the changes decades ago. Well... welcome to human nature. People don't change unless they have to.

It's amazing how many drunks, only find help for their alcoholism, after they have lost their family, their job, their home, and everything. Then when they have absolutely no choice, they suddenly find help.

That's how it works. We're all human beings, and we all do this. My father made me mow the lawn with this crusty old lawn mow, that barely ran, and hand bars would fall off, and the auto drive didn't work so it if it accidentally engaged, you slammed to a stop. As long as I was the one mowing, it wasn't a big deal. The very month... literally the month I moved out from my parents house, guess who had a new law mower?

That's how people are. They deal with it, when they have to deal with it.

Corporations are just a bunch of average people. They operate exactly the same way.