Is the US banking system "backward"?

From Debit card: PIN or no PIN? - #42 by Tripler

The following was a reply to a post that described writing checks for items like PBS memberships that need the membership slip mailed back with the payment.

Is it really possible in other countries to pay all of your bills through the bank’s website, without the bank ever having to mail a check? I just checked my very large bank’s billpay site and although there are payees listed in every state of the US, none of my doctors are listed. Which is not surprising to me - how could any one bank possibly have all the doctors ( lawn care companies, newspapers, pest control services, small landlords etc) in the US listed in their bill pay system? Some of then I can pay through the website of the billing entity but if it’s an infrequent bill, it isn’t necessarily easier than writing and mailing a check.

I can’t just email a payment unless the recipient has or is willing to set up Venmo or Zelle or something - and in any event, I need to have an email address to send it to , which I’m not always going to have ( I wouldn’t be surprised if my garage landlord doesn’t even have an email address).

I’m not sure if that’s a matter of the US banking system being backward so much as it’s just a difference in business practices between countries - maybe in other places, doctors never have solo practices with a billing clerk mailing out bills and collecting payments. Or all children’s sports organizations do their billing through a large entity that does show up on bank bill pay sites.

Or maybe it’s just that people have different situations - none of my doctors show up on my bank’s bill pay site, but I’m sure there are plenty of people in the US who can pay all their bills through their bank’s site and maybe there are people in Canada or wherever who can’t.

We have a few differences. Canada is dominated by about 5 big banks plus maybe 1000 credit unions. The nationwide debit and ATM interchange called Interac was setup by these banks many years ago. Everyone who has a bank account can receive e-transfers for free. If you register your mobile number or email (it doesn’t have to be email), you can even have it auto deposited. There is no need for a 3rd party like Zelle.

The second difference is “paying your doctor”, which is not something you do up here. Unless you are paying your doctor for an uncovered service like a sick note for travel insurance, you just don’t.

My kids used a system called School Cash Online to pay for things like yearbooks or field trips.

15 years ago, a Canadian friend who was living in the US couldn’t believe we still use checks here. Some service provider back then only accepted checks (cleaning person, maybe?) or cash.

We were way behind when it came to tap-to-pay, like a 5-10 years behind the UK. US banks had to scramble to be compliant with those global standards.

Yes, we’re definitely backward.

What do you mean by “listed”? At my large national US bank, I can search for payees the bank already knows about. Which are simply payees that other customers have already added to the bank’s system. Not payees the bank has somehow made pre-arrangements with.

If my e.g. dentist isn’t listed, then I add them as a new payee. New to me, and new to the bank. If tomorrow another patient of my dentist searches they’ll find their dentist (AKA my dentist) as a listed known payee.

Now the mere fact a payee is already listed or is addable does NOT mean that payee can receive payments electronically. That’s a completely separate dimension of the problem from whether they are listed as a payee known to my bank.

I’ve done online bill pay through Citibank for three decades or more. The larger companies, like my cable company or the credit card issuer are listed as available for an electronic funds transfer. I assume these were set up by Citibank, because thousands of customers are sending money to them. Payees, like a medical practice, that aren’t listed can be paid via a check sent directly to them by Citibank. I just have to provide the address and account number (to put on the check so the payee knows how to record the payment).

I get that there’s no need for a 3rd party like Zelle but what I’m asking about is how much of the difference is the banking system and how much are the business practices? OK, you don’t pay doctors - but what about the pest control company ? Or any organizations you are a member of? Do they always give you whatever information (mobile number or email) is needed to pay them electronically though your bank rather than using the business or organization’s website? If they always give you that information, I’d say that’s less a matter of our banking being backwards and more a matter of business practices being different. Because I can pay any entity electronically if they are willing to do that- the issue is plenty don’t want to be paid that way.

It’s of course possible that I am incorrect - my understanding was that the list is those who can receive payments electronically. Although I would find it odd if none of Citibank’s other customers paid any of my doctors through the website by adding them as a payee, even those that belong to large practices. But my question was

I live in Luxembourg, and yes. We pay everyone this way.

If we get a charity solicitation in our mailbox, the contribution form will have the charity’s IBAN across the bottom. We put that into our online payment system, specify an amount, and click Go.

When we get our bill (via email) from the telecom provider, there is, again, their IBAN across the bottom. We’ve paid them lots of times, so they’re saved in our account, but if it’s your first time, just copy that in, and bam, done.

If you’re selling your used TV to a stranger, you give them your personal IBAN, and they transmit the payment to you directly.

Some places have a QR-ish symbol you can scan which does all the above for you automatically.

As a transplant from the US, I can confirm firsthand — the American banking system is very, very backward and antiquated.

I’m still a bit confused by the scenarios here, but for sure we don’t use checks in the UK.
One-off payments typically only exist digitally; I see it on my phone or computer, I pay using my card or google pay.
For longer-term things like utilities, you would typically set up a “direct debit” from your account. This can be done entirely digitally, but it is still common IME for companies to send a physical sheet that you need to fill in and return. Maybe to not shut out older customers?

And if any Americans want to feel particularly bad, then I’ll say China is way ahead on all these methods. Everything is done through QR codes or apps. Setting up a cashless business is as simple as printing out your social media QR code and putting it next to your counter (bigger businesses have more efficient methods, but I like that no-one needs to buy card reader tech or anything like that).

Personal cheques still exist in Canada, I have a book of them somewhere in my house. But I’d be hard-pressed to remember the last time I actually used one. Going back over 20 years to when I lived in a condo, probably 90+% of the cheques I wrote then were to the condo corporation for the monthly condo fees. Since then, almost nothing.

We use them occasionally to transfer money from my wife’s bank account to my bank account (or vice versa). We could do the same thing with an email transfer, but I think we have a limited number of free email transfers per month (compared with a book of cheques that is just otherwise gathering dust).

Personal checks mainly exist in Germany as a notion (the symbolic blown-up check that a charity and a donor pose with for the press - while the actual transfer of money has been done by bank transfer.

In Germany it’s much like @Cervaise said for Luxembourg. Virtually all payments other than in-person payments (i.e. cash or card) are made by bank transfer or direct debit.

I give my IBAN to my employer and they transfer my net wages at the end of the month.

Craftsmen send me a bill, with their IBAN at the bottom, and I pay them by bank transfer. The same with charities soliciting donations.

The tax office has my IBAN and a written debit authorisation on file. After processing my tax declaration they transmit the refund (if applicable) to my account, or debit my arrears (if applicable) from my account.

Utilities, local transport, gym etc. have my IBAN and debit authorisation and help themselves to the appropriate amount from my account on the occasion of the monthly billing cycle, or in the case of local transport when I have bought a ticket in the app.

When we sold our old car to a dealer last month we sat in their office, signed the contract, gave the representative the IBAN of our joint account; he went to the back office to make the bank transfer as an instantaneous transfer (an option that with some banks costs a small fee), I looked into our joint account on the phone, saw that the money had arrived, and we handed over the vehicle title.

When we bought our current apartment, the penultimate payment was due on taking possession (the ultimate payment due only later, with the whole building being finished in all respects). We met for pre-possession approval, I transferred the penultimate payment, and we got the key.

I can pay to accounts in the whole Single EURO Payments Area at the same fee that would apply to a bank transfer within the same bank.

If someone has your IBAN (whatever that is, says the US banking customer), what stops them from pulling money out fraudulently? I can see handing it over to some very trustworthy counterparties, but not to everyone I happen to do business with.

AI to the rescue:

An IBAN, or International Bank Account Number, is a standardized international bank account number used for identifying individual bank accounts when processing international payments, helping to reduce errors and speed up transactions.

Not much different than handing out your bank routing number and your checking account number for debit transactions, like the water bill or other utilities.

Right, but I don’t hand it over to the local plumber, house keeper, random customers, etc. If I were a craftsman, I wouldn’t put it at the bottom of a bill – who knows where that ends up??

I’m hoping @Mops will weigh in here…perhaps your IBAN number allows only incoming payments, but you have to verify/allow outgoing transfers?

Sounds like they set up autopay for it as well. I really have no idea.

The IBAN is the International Bank Account number, identifying an account worldwide - basically the account number of the bank, plus the routing code of the bank within the country, plus the code for the country, plus check digits.
For example the treasury of the city where I live has bank account no 488 at the local savings bank, and the corresponding IBAN is DE27640500000000000488 - I have recently paid a speeding ticket to that account.

I can have my bank reverse direct debits (a) for debits from parties that I have authorised, within 8 weeks, (b) for debits from parties that I have not authorised, within 13 months. That’s why the city freely publishes their above IBAN without fearing that people make off with the city’s money.

How does the bank know if you authorized it or not? Do you just say you didn’t authorize it after the fact ?

Our modern banking system (see thread title). I mean, I know that sounds flip, but it’s the truth. Everyone here does it, nobody thinks twice about it, and it just works.

I’m perfectly willing to believe that it all works and no one thinks twice about it - but that doesn’t say what about the system prevents it. It sounds like the only thing preventing it is people’s honesty.