Nacha is best known as the organization behind the widely used ACH Network, but its work as an organization goes far beyond that. Nacha is also a problem solver and consensus builder, working with the financial services industry to advance innovation and interoperability in the payments system.
Several years ago, Nacha began researching where improvements could be made regarding electronic payments. It learned that although the movement of money is not a major concern for businesses, pre- and post- payment processes are. Outdated manual processes, lack of automation, and concerns about risk and fraud regarding information sharing plagued the industry.
In response to these findings, Nacha developed a better way for payment information exchange to occur: Phixius. To learn more about the recently launched Phixius platform, PaymentsJournal Editor-in-Chief Ryan McEndarfer spoke with George Throckmorton, Managing Director at Nacha.
What is Phixius?
In February 2020, Nacha announced that it was building Phixius, a blockchain-supported platform that enables the sharing of payment-related information between businesses and streamlines the payments process. More specifically, Phixius facilitates trusted exchanges of pre- and post-payment information between parties. Vetted participants connect directly to Phixius to more securely exchange data, rather than storing and accessing data in a less-secure central repository such as the cloud.
Throckmorton explained that Phixius is considered a platform because it consists of three key elements. “Technology, rules and governance, and a user network are what make up the Phixius platform today,” he said. Phixius uses cutting edge technology via open APIs, distributed ledger, and a common set of rules for its entire network of users.
Phixius is moving payments forward by addressing industry challenges
Through the creation of Phixius, Nacha was able to solve a number of challenges the industry is facing regarding the facilitation of trusted payment-related information exchange. Governance and standardization, interoperability, and fraud prevention and automation are all focus areas of the platform.
Governance and standardization
Today, data exchange between companies is primarily conducted through bilateral agreements, with one of the two companies driving the decision and mandating the type of technology that will be used. This arrangement can become complicated and time-consuming when companies are attempting to manage hundreds of bilateral agreements with different specifications.
With Phixius, all endpoints communicate with one another through standardized APIs and bilateral agreement with a universal rule set. That rule set lays out the specifications regarding “what happens who is responsible, and the warranties and liabilities that go with that,” noted Throckmorton.
Phixius supports multiple use cases, including interoperability between networks and payment types. “One of the things businesses struggle with today is maintaining their master file, which is a long list of businesses they need to pay or are engaged with,” said Throckmorton. For many companies, this master file contains hundreds or thousands of companies.
“One of the first use cases for Phixius was something that we call the electronic payment information exchange, which is truly a B2B use case,” he added. “So we’re able to do that securely by those two businesses forming what we call a smart contract on the blockchain of Phixius, where they exchange that data without centralizing it.” Because there is no central data stored, each participant can only see interactions and information that is relevant and permissioned to them.
Fraud prevention and automation
The platform was also built with data verification and trust in mind. Data exchanged via APIs can be validated on Phixius. Further, each Phixius participant is vetted and authorized by Nacha as a validated credential service provider.
“In some cases, it’s not about information that a company doesn’t have that it wants. It’s about data it already has that it wants to verify as trustworthy and correct,” explained Throckmorton.
This verification is crucial to reducing risk and fraud. “Verification is also about having good, wholesome payments move through the network and having exception-free payment processing,” noted Throckmorton. The automation of services like essential information verification reduces the amount of manual work companies need to do.
Phixius bridges information exchange for organizations and is one way Nacha is solving the payment industry’s problems of today and tomorrow. The secure information exchange platform will propel innovation across financial institutions. “The basis of what Phixius is trying to solve is creating a better way in which businesses can share pre- and post- payment information. That’s what Phixius does. It makes it easier for companies to do that,” concluded Throckmorton.