If you want to observe a particularly American problem, go open your phone’s Venmo app. Click on “me” and then click on “transfer.” If you have a balance in your account, you’ll be given two options. Option one gives you your money for free — but in “up to 3 biz days.” The other option is “instant,” but comes with a price tag of 1.75 percent of the transfer, going up to $25 for large transactions. Getting access to your own money comes with a price, either in time or in cash.

The problem is relatively trivial when it comes to settling up restaurant bills with your friends, but for more life-critical things like rent or paychecks, these delays really matter. It’s an especially embarrassing situation when other countries, like Brazil, Japan, and the UK made instant bank transfers ubiquitous and affordable years ago.

“If you work through the full costs of what Americans pay for their payment system,” Dan Awrey, a professor at Cornell Law School and an expert on payment systems, told me, “it’s probably the most expensive payment system in the G20 by a pretty significant margin.” The Brookings Institution’s Aaron Klein, one of the few vocal advocates for instant payments, has estimated that the costs to consumers from delayed payments, from overdraft fees to interest on the loans Americans take out to cover their expenses, could be as much as $10 billion a year.

In fairness, the US is trying to do better. For years, the Federal Reserve has been building out an instant payments system called FedNow, meant to supplement or eventually supplant traditional ACH (automatic clearing house) transfers, the slow but cheap multiday check-clearing system now used for many transactions, like paychecks and rent payment. So far, though, it’s been largely a bust. The service’s most recent quarterly report, for Q3 2024, reported only 336,000 transactions. By contrast, the Fed processed 5 billion ACH transfers that quarter; next to that, FedNow is a rounding error.

FedNow offers faster payments, at a low price to banks, which could help workers get paychecks earlier and move money between accounts more easily, possibly avoiding costly overdraft charges. Why have so few banks switched over?

Klein describes it as a case of industry sabotage. “Banks maximize profit,” Klein summarizes. “The slow payment system is more profitable to them.”

How money moves

To understand why, let’s back up for a second. How, exactly, does money move around the banking system right now?

The main method, familiar from getting direct deposited paychecks or depositing physical checks, is ACH. This is known as a deferred net settlement system. Individual checks are not processed on their own: If my granddad sends me a........

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