NACHA, the ACH rule-making body that has often seemed like a rabbit among the lions, has stepped out aggressively with a request for comment on a proposed “Same Day ACH” service.
As a long time admirer of the U.K.’s “Faster Payment” system (roughly analogous), I am delighted to see the prospect of a similar service arrive on this side of the ocean. The service would allow originating banks to submit either debits or credits (with some dollar limitations) and, significantly, require receiving banks to participate. This makes it a home run, especially in comparison to the Fed’s “Same Day ACH” pilot, which did not require receiving bank participation.
The U.S. banking industry is unique in the world in its lack of concentration – our rough estimates show that the big three banks (BofA, JPMorgan Chase, Wells Fargo) account for only about a quarter of combined bank and credit union deposits. The only way in which all banks can participate in a new payment product, therefore, is if a 3rd party sets rules which they have to follow – getting banks to “opt in” is a non-starter. (In the U.K., this is actually how Faster Payments works – but they have many, many fewer banks.)
The service would operate along side the traditional next day ACH service – it would most probably be packaged as a premium service for originators. It would be extremely useful for bill payment and corporate trade payments. With some productization, interesting plays in eCommerce payments (some variant of SVP?) and P2P payments might be possible. It is unlikely to change how the bulk ACH payroll and preauthorized debit programs work.
There is nothing not to like about this proposal. Faster payments, less risk, happier customers – and the potential for originating banks to charge fees to originating customers. Ok, so some smaller banks are going to grouse about the cost of complying with the required receive-side. But the more imaginative of them will see the potential to offer new products to local billers and corporates. And I suppose the largest banks may worry that this dilutes their big-bank advantage (and direct routing arrangements) – but I hope they won’t oppose it.
Nice job, NACHA! Let’s hope the comments phase is successful.