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In February 2020, Nacha announced that it was developing an online platform that integrates technology, rules, and participants to exchange payment-related information across all payment types. The platform, named Phixius, went live and completed its first information exchange transactions by early November. 

To learn more about Phixius, the significance of interoperable financial services, and what the future holds, PaymentsJournal spoke with George Throckmorton, Managing Director at Nacha and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.

Phixius: A background

The story of Phixius goes back multiple years. In response to calls from the industry for a simplified and automated process for exchanging payment related information, longtime industry leader Nacha conceived of and created the platform.

“In conversations with [financial services] organizations over the last several years, it became apparent that there was a gap and an area of improvement needed around the exchange of what we call payment related information,” said Throckmorton.

The movement of money itself isn’t the issue. “Emerging rails are very capable of moving money from point A to point B, and they do that very effectively and meet the various needs of businesses in order to move those funds,” he added.

Rather, deficiencies lie in pre- and post-payment processes. “There is a lot of work [that needs to be done] on what we call the pre- and post-payments side of these processes—for businesses, there’s a lot of data that needs to be obtained [and] that needs to be verified when they are onboarding new businesses to make payments,” explained Throckmorton. The same is true for companies on the receiving end of payments.

Phixius was built to solve the problems of today and tomorrow

Today, companies typically rely on bilateral agreements to safely exchange data. While these are effective, they become difficult to stay on top of when organizations are tasked with managing hundreds to thousands of different agreements that each have their own specifications.

“It can be massive—from 3,000 to 10,000 to 30,000 records or businesses that they are trying to onboard—and then to maintain that information becomes an issue,” said Throckmorton. 

Phixius eliminates this issue by enabling each end point to communicate with one another through a standardized API set and bilateral agreement with a universal rule set. Vetted participants connect directly to Phixius to more securely exchange data, rather than storing and accessing data in a less-secure central repository like the cloud. 

By bridging information exchange and enabling interoperability between organizations, Phixius is Nacha’s way of solving the problems of today and tomorrow. The secure information exchange platform will propel innovation across financial institutions.

Nacha’s APIs drive standardization…

Financial institutions have led the way over the last several years in working with their clients to offer better experiences regarding sharing information. FIs have largely turned to application programming interfaces (APIs) as a way to easily connect systems so they can communicate with one another.

But today’s consumers—especially corporate clients that have accounts at multiple FIs—want it to be even easier to move information from one bank to another. That’s where a standardized API, like those developed by Nacha’s membership organization Afinis, comes into play.

Phixius Xchange Service APIs are standardized, open APIs built upon common industry standards and configured by Phixius to transport information securely. Every Xchange service on the network makes use of the same trust model, blockchain technology, and guiding principles that support the network.

“With Phixius, when we talk about standardization, it is really through APIs,” said Throckmorton. “Every participant who exchanges information with another participant does that through a fixed API. Nacha is not wanting to develop these APIs in what you might call a vacuum…we do [so] in collaboration with the industry.” 

…Which in turn fosters interoperability and innovation

The current world abounds with innovation, and the banking industry and payments landscape are no exception to this trend. The streamlined nature of Phixius is necessary for banks to foster innovation, which is crucial in the ever-evolving payments industry. 

Companies work to create products and adopt cutting-edge technology in a world shifting toward digitization and automation. But without any attempt to provide interoperability between innovative products and services, complications arise.

“Something like Phixius may go a long way to help create interoperability among existing and planned payment rails,” remarked Grotta. “It’s helping to create the data and trust that I think is necessary in order for payments to transverse from a variety of different payment solutions.”

What the future holds

The launch of Phixius does not mean Nacha’s work is done. Rather, it will continue to identify and support the evolving needs of businesses receiving and sending payments of all types.

A number of future state benefits can be expected as Phixius expands, including: 

• A trusted network featuring automated look up, access, and update notifications for buyer profiles, with a warranty for data validity; this enables credentialed service providers to distribute requests for proposals (RFPs) to other distribution channels without requiring bilateral agreements.
• Standardized communication channels that leverage standardized APIs for interoperable information exchange across multiple use cases.
• Secured information exchange to automate the validation of information via blockchain/distributed ledger technology tokens, resulting in smart tokens that ensure no exchanged information was altered.
• Deepened customer relationships that allow for greater bank-client engagement and efficiency by enabling bank clients to manage their key accounts receivable (AR) needs and payments within the same organization. 

Because Phixius was built exclusively for the benefit of organizations, the ongoing dialogue between Phixius and its current and future credentialed service providers will remain at the forefront and continue to drive forward the evolution of Phixius.

“Phixius was developed in a way that allows it to support the exchange of various types of data. [Nacha] is looking at continuing to support businesses and their various needs for data services,” concluded Throckmorton.