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Re: How do bank payments actually work?

From: Fabio Barone <holon.earth@gmail.com>
Date: Sat, 23 Jan 2016 13:37:06 -0500
Message-ID: <CAOL8i_kRirK2CcAHxBLb3E_Zk3Qq=vvTZ4Z5Ethbna-sMUDVmw@mail.gmail.com>
To: Joseph Potvin <jpotvin@opman.ca>
Cc: Web Payments <public-webpayments@w3.org>, Interledger Community Group <public-interledger@w3.org>, tomblomfield@gmail.com
Please bear me with me for my ignorance...

..but I would like to understand this a tad better:


   - I have seen similar ideas in complementary currency spaces, the idea
   being that value can be exchanged over different currency circles
   - It never took off because the underpinning values systems differ too
   heavily - there's no way to , bridge a local money X with another Y,
   there's too much difference in money design and value systems

Now, my questions for these interledger exercices, are you guys talking
about interledger,

   - but based on the SAME currency as value exchange? Or different ones?
   - based on fiat currency, and/or bitcoin?
   - no currency at all, "just" sync records?
   - generic interledger which would work no matter what resource the
   ledger is actually focused on?

Maybe my questions are completely off, if I in fact would have understood
things completely wrong.

Would welcome a brief clarification, thanks.




2016-01-23 10:04 GMT-05:00 Joseph Potvin <jpotvin@opman.ca>:

> Two comments on the published description...
>
> 1. "Banks pay a few pence per transaction, although no bank currently
> charges customers for this service."
>
> It's worth noting that this charging structure is suitable for
> transactions greater then, say, about 2£. It would require a different
> transaction fee structure to handle micropayments.
>
> 2. "Three times a day, VocaLink will send a message to all participant
> banks informing them of their position. To “settle” the funds, participant
> banks have accounts at the Bank of England. They will either make a single
> payment to FPS (if money has flowed out of their bank), or receive a single
> payment (if the net transfer of funds is in their favour). This payment at
> the Bank of England is just another double-entry in a ledger; the bank’s
> settlement account is debited and the FPS account is credited with the same
> amount."
>
> I think perhaps this is mis-stating the operation by using words "make a
> single payment to FPS" and "receive a single payment". I'm fairly certain
> these are accounted for as loans, to which the "Bank rate of interest" is
> applied. Please correct me anyone thinks I'm wrong about how this
> particular settlement system works. I think that while the mechanics remain
> true that it's "just another double-entry in a ledger", these show up in
> the books as off-setting loaning and borrowing by the Central Bank, and
> they include an interest rate which needs to be taken account of.
> http://www.investopedia.com/terms/b/bankrate.asp
>
> For those of you creating test environments, taking account of this factor
> complicates the model in two ways. First directly, you would need to attach
> some sort of index (the interest rate) to the inter-bank transactions.
> Second, you would need to create an policy-motivated actor (agent) who
> makes decisions about that index.* [I'll proceed a bit off-topic here
> just to illustrate...] This is because this  "the Bank Rate" which is the
> benchmark by which a Central Bank motivates increases or decreases for all
> interest rates of the given currency zone. The 'fun' start to happen when a
> central bank decreases an interest rate in order to simultaneously
> incentivize capital investments (its cheaper to borrow) and decrease forex
> traders' demand for that currency (better returns on static deposits are
> found elsewhere) in a period of competitive currency devaluations, all of
> which artificially stimulates that country's export market. Well, they've
> all been doing that for a while, and have run out of room at the bottom.
> But they keep going!
> http://www.bloombergview.com/quicktake/negative-interest-rates
> <http://www.bloombergview.com/quicktake/negative-interest-rates>  *
>
> [Back on-topic...]  Any model of payment must be a simplication of complex
> reality, so this is not a critique of the published description as far as
> it goes. I just raise a caution that with a title like "How do bank
> payments actually work?", this summary of some of the mechanics of the
> system inevitably has to leave out much of how bank payments actually work.
>
> I've c.c.'d the author, Tom Blomfield, in case he'd like to comment.
>
> Joseph Potvin
> Mobile: 819-593-5983
>
> On Wed, Jan 20, 2016 at 6:03 PM, Melvin Carvalho <melvincarvalho@gmail.com
> > wrote:
>
>> Interesting post on the inter ledger element of banking.
>>
>> https://getmondo.co.uk/blog/2016/01/20/how-do-bank-payments-work/
>>
>> Im thinking of simulating this on a testnet for people to play around
>>
>
>
Received on Saturday, 23 January 2016 18:37:36 UTC

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