Janet Estep, president and CEO of NACHA – The ElectronicPayments Association, is reiterating her role and opinion on the evolution ofpayments in the U.S. and specifically relating to the ACH (automatedclearinghouse) network. NACHA has goneon the record for years now that the financial industry needs to speed up itspayments capability and Estep tracks NACHA’s record as far back as six yearsago when it created Secure Vault Payments. Secure Vault Payments leverages the ACH Network and has a real-timeguarantee of good funds, but it has not experienced widespread adoption byfinancial institutions.
Estep cites a recent Federal Reserve Study that found that69% of consumer payers and 75% of business payees prefer instant or one-hourpayment speed. The three questions thatneed to be answered for all American users of payments and effectively impactspayment speed are: validate good funds, settlement of those funds, or actualfunds availability in the user’s bank account.
Although ACH as it is currently designed cannot meet theneeds of real-time payments, it can be a valuable stepping stone towardsenabling faster payments. NACHA ismoving towards a faster payments model that takes ACH from a next-day paymentsmodel to a same-day payments model by implementing three windows for settlementeach day. NACHA, over the last severalmonths, have been collecting feedback from industry participants to enable thedevelopment of a set of rules to allow the multiple windows to occur. Atimeline for this implementation has not yet been disclosed.
“Nacha’s work as a rulemaker for many types ofpayments and standards has demonstrated the benefit of continually working tobring parties together to identify solutions that balance the needs of variousentities. Today’s work on same-day ACH is an industry effort that will serve asa first step to moving payments faster,” according to Janet Estep, presidentand CEO of NACHA.
The concept of real-time payments, and faster payments ingeneral, has been identified over the last several years as a meaningful andnecessary step to updating the U.S. payments systems. Although credit and debit card paymentsfulfill part of the needs of American consumers and businesses, there are manyother applications requiring faster payments mechanisms for certain types oflow value as well as high value payments. Consumers and business are willing to pay for certain types of paymentsto occur real-time or same day. Research, beyond the Federal Reserve study referenced above, havesupported the existence of user needs regarding faster payments. The movement to speed-up the ACH paymentssettlement process is an absolutely necessary one – and a long time in coming.The outstanding question awaiting an answer on “faster payments” is why three settlementwindows and when will this be implemented. The second series of questions relates to real-time payments, itsdefinition for the U.S. market, and the timeline.
Overview by Ron Mazursky, Director, Debit Advisory Service for Mercator Advisory Group
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