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Why Nacha Feels a Need for Speed
Tuesday, October 28, 2014 6:35 AM

Jan Estep, president and CEO of Nacha, the Electronic Payments Association, released an opinion piece in the Credit Union Journal, reporting that the financial industry is working to make payments better, more efficient, simpler, and faster.

Estep says that recent Federal Reserve study found that 69 percent of consumer payers and 75 percent of business payees prefer instant or one-hour payment speed. The key question for all users is what functionality will be required to meet Americans' needs: validation of good funds, settlement of funds, or actual funds availability in a user's bank account?

As the backbone for electronic payments, Nacha supports over 80 million ACH payments each day, including direct deposits and direct payments. It also enables settlements for credit and debit card transactions and ATM transactions. By speeding up processes within this foundational system, Estep says they can better meet the needs of the industry.

Nacha, which serves as the administrator of the ACH network, identified the need for faster payments six years ago when it implemented Secure Vault Payments. SVP is an online and mobile payment system that leverages the ACH Network and offers a real-time guarantee of good funds, 24 hours a day and seven days a week. Although the technology already exists to meet the demand for faster payments, not all financial institutions have adopted it. So when the Federal Reserve cited the lack of a real-time payments system as an issue in their September 2013 paper, Nacha agreed.

But real-time payments are only one part of the solution, Estep says. While there are some unmet consumer and corporate needs that would benefit from real-time payments, there are many other needs that can be met by same-day payments. Expedited bill payments, payroll applications and many ad-hoc business payments, for example, would benefit greatly from same-day ACH. Same-day ACH would allow the network to move payments faster and provide additional functionality that meets the industry's needs for faster payments.

To that end, Nacha is working toward a phased implementation approach that will move the ACH network from next-day settlement to same-day payment processing during three different windows. Estep says this would be available for virtually any transaction and provide greater certainty about fund availability, thereby improving the efficiency of hourly payroll disbursements and last-day tax or bill payments.

Over the past several months, Nacha has methodically collected and analyzed feedback on this approach from financial institutions, businesses, and payments service providers in an effort to identify a workable path forward in advance of formal rulemaking on same-day ACH. This step will help all parties to think carefully about the rules, tools, and technology that can help create a bridge from today's payments to those of the future.


Source:  Credit Union Journal