Notes of various currency

When I lived in Australia, sending money to an individual or business was as simple as knowing their Bank State Branch (BSB) number and account number. I could go through a web interface, or a phone app, and send $50 to a friend. It would show up the next morning in their account (or potentially the same day if we used the same bank). This transfer went through a government1 system known as the Australian Payments Clearing House (APCA), was completely free of fees for individuals and worked with all banks in Australia. Many countries have similar systems, some adding additional security with one-time use Transaction Authentication Numbers (TANs).

Although America has a means of electronic transfers between banks, it’s not available for individual person-to-person transfers. Automated Clearing House (ACH) transfers are only available to certain businesses and the means for verifying identity and exchanging money via it are slow and convoluted. I honestly hadn’t realized how far behind the American banking system was until I spent several years exposed to various foreign banking systems.

While I was away, I had asked my friends, “Does America support direct person to person digital transfers yet?” People would mention that this could be done via PayPal, Square or even Facebook. None of these are direct person to person transfers. Many incur fees and require accounts on privately held systems. Although some of these private systems connect to banks directly via ACH, the verification process is terribly outdated. Many simply use the existing Credit/Debt card networks, incurring and passing on the additional fees to the end users and businesses.

In many countries, peoples’ Tax ID numbers and bank account numbers are not considered secret. In the US, Americans have no national identification numbers or Tax IDs. Instead the Social Security Number (SSN), despite at one time having the words “Not for Identification” written on Social Security cards, is abused in such a way as to also serve as a means of security verification for banks, government offices, employers, insurance companies, credit reporting agencies and background checks. Security aware Americans often attempt to protect both their SSNs and bank account numbers, as public knowledge of either can lead to identity theft. Even though ACH transactions are audited, run in batches and traceable, the secrecy around bank account information prevents any type of implementation of electronic person-to-person transfers.

Furthermore, when a private entity such as PayPal wants to interact directly with a bank account, they often require an authorization process where they deposit two small amounts (typically only a few cents) into a bank account provided by user. The deposit can take anywhere from one to three days to appear, at which time the account is verified by entering those amounts into PayPal’s web interface. This is entirely backwards from other countries, where direct transfers to businesses and individuals can all be done entirely through one’s home banking website or mobile application.

In America, direct person-to-person transfers still require a check. The physical check doesn’t even need to be deposited into a bank. Thanks to the Check-21 Act passed in 2003, an image of the front and back of check is just as legally valid as the check itself. Many banks have cellphone applications which can be used to photograph a check to initiate the transfer (the original check should then be voided or destroyed).

A physical check contains considerably more information than electronic transfers. When a person issues someone a check, it often has the bank routing number, their account number, their full name and address (typically used for debt collection purposes when bad checks are issued). The other countries I’ve lived in do not have check photo scanning built into their mobile applications because, as I’ve stated, they have direct person-to-person electronic transfers. They don’t need to resort to outdated mechanisms such as physically signing and photographing a check.


The Australian government provides free, supported tax software for its residents and citizens. When I used it back in 2013, it wasn’t the prettiest interface, but it was very usable and straight forward. In New Zealand, people don’t file taxes. Everyone’s income information is collected by the Inland Revenue Department (IRD), and taxes are automatically calculated and withheld. At the end of a tax year, residents can log into the official website and review their information for mistakes. If there is a refund due, it can be transferred to a bank account from the same web interface. Many European nations have similar systems.

In comparison, the US tax process is overly complex and convoluted. The US Internal Revenue Service (IRS) does allow people to file for free by using paper forms, but they provide no official government software. Instead, companies like Intuit — makes of TurboTax — and H&R Block have collectively spent over $5 million to lobby against better solutions. They pushed for laws with deceptive names such as the Free File Act of 2016, which claims to allow lower income families to e-file for free. However, it blocks the IRS from creating their own public software. Furthermore, few of the people eligible for the no-charge filing programs even use it, as the system is confusing and pushes people towards the paid options instead2.

Living in the 90s

Dealing with money electronically in America is archaic. Many banks have on-line bill payment systems. Although they may work out deals with larger utilities for electronic payment, for things like rent paid to individuals, these on-line systems often print and mail paper checks to the payee, which are then either electronically or physically deposited in a bank. Some banks allow personal transfers by e-mail or SMS/text, but this typically requires the recipient to create an account on website for the sender’s bank and then input details to complete an ACH transfer. Only some banks support this and it’s far from universal.

I’m not sure if we’ll ever see a more robust banking system in the United States. Payment gateways are dependent on taking percentages from large numbers of transactions in order to grow their profit margins. The Federal Reserve controls the ACH standard, and there is no incentive for them or banks to modernize their systems and allow for direct person-to-person payments. With the current influence of financial industry lobbyists, it’s unlikely we’ll see legislation to mandate such changes any time soon.

  1. A reader e-mailed me to point out that Australian Payments Network Limited (AusPayNet), which was formerly the Australian Payments Clearing House (APCH), is not a government entity. It’s a self regulatory group formed by Australian banks and financial institutions. 

  2. Filing Taxes Could Be Free and Simple. But H&R Block and Intuit Are Still Lobbying Against It.. 20 March 2017. Huseman. ProPublica.