Exactly six months ago on Oct. 6, 2015, speaking at the Faster Payments Imperative, NACHA CEO Jan Estep emphasized the need to continue the dialogue about what the concept of faster payments really means.
“We need to continue to peel away the onion,” Estep said. “Over the next year, there will be a tremendous amount of change.”
Fast forward six months and that change has sparked more dialogue in the industry about what “faster” really means with respect to payments, and how, when and where faster payments is really needed most. Today, the conversations have shifted in a direction that can turn all that talk into action, Estep believes.
“The payments industry as a whole is beginning to understand that faster payments actually means a number of different things. The conversations are becoming more precise, more accurate and, I think that allows us to say ‘so what are we going to do beyond talking about it?’” Estep told PYMNTS.
The ‘skinny architecture’
Faster payments, of course, means different things to different people, she emphasized. And so is the use case for real-time versus simply faster — particularly because each of the terms has different use cases and different characteristics.
“The understanding of faster payments is really increasing across the ecosystem and that is good because it means then that people can start building new services and really support end users who want to embrace the concept of moving payments from one person or one entity to another in a more timely fashion,” Estep said.
And the ACH Network provides a building block to develop these new services, Estep said – because it’s “skinny”.
“It has a very solid foundation, and everybody has to agree to what that common, solid foundation is. But that gives you the ability to innovate on top of it,” she said.
Estep believes that it’s really the innovators who create the robustness of the ACH Network — innovations that can, in some instances, remove the friction out of payments, or allow the industry to collectively keep the Network safe and secure, or create added value between parties.
Faster payments innovators
Three of those innovators were highlighted at 2016 PYMNTS Innovation Awards, and were recognized for being the “Best Innovation in ACH.” The three winners were: ZipLine (Gold), Transactis (silver), and BioCatch (Bronze).
“I thought it was really interesting to think about these three ‘best of ACH’ award winners because they actually fit within each of those areas of innovation that I called out before. ZipLine has easy pay at the pump that takes out the friction of an ACH payment. Transactis has added value to the ACH Network by replacing paper bills, along with the payment. BioCatch helps keep the Network safe and secure through authentication and new innovative techniques to detect fraud,” Estep said, explaining how each of them add value to the ACH Network and faster payments.
“When you put them in combination, it was a really nice collection of award winners that do provide that layered value in different ways over the Network,” she added.
Getting to where we are today
A few years ago, the conversations related to faster payments were directly centered on “faster.” And that was focused on things like faster authorization, faster clearing between banks, faster final settlement between parties, and information associated with the payments.
“Each one of these is a variation on the theme of ‘faster,’” Estep said. “Each one requires different implementation efforts and each can provide value to the various different parties.”
And that’s what makes today’s conversations more complex — but also more robust.
“It’s that robustness of the dialogue that I think we’re starting to embrace as an industry that helps people understand and helps move toward implementation and offering of services,” Estep added.
The next six months
In the U.S. faster payments will be here before we know it.
Same Day ACH credits will be rolled out starting Sept. 23, 2016, followed by Same Day ACH debits in 2017, and then faster ACH credit funds availability requirements for RDFIs as the third phase.
“Recent surveys show that financial institutions across the board will be ready to not only receive same-day transactions, but also the majority of financial institutions are getting prepared to originate — which means they want to offer services to businesses and consumers, starting with ACH credits for those who want to move their money to another party on the same day,” Estep said.
And the next steps toward making faster payments a true reality in the U.S. also means bringing education to organizations of all types to ensure they are all on the same page. It also means reaching out to vendors and software providers across the industry to support the infrastructure needed to “make sure that everyone is ready and really thinking about ways they can expand their products and services,” she explained.
‘Where the value is created’
As for where the conversations should be headed?
More dialogue, more education and more engagement, Estep emphasized.
“It’s very important that we keep engaging the industry in what I call this ‘skinny architecture,’ as a solid foundation of hopefully just enough rules to better understand everyone’s roles and responsibilities, she said.
Estep believes that the ACH Network is different than other payment networks because it provides the base layer of functionality at a “common level” as well as the rules, but the tools — or solution products — that sit on top of the ACH Network that make it easy, safe, secure and add value to those using the Network.
That, in her mind, is where the real value is created – providing the base layer for innovations and innovation to flourish that make payments faster, in some cases, but more flexible and better, across the board.
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About The Tracker
The PYMNTS Faster Payments Tracker™, powered by NACHA, is your go-to resource for staying up to date on a month-by-month basis. The tracker highlights the contribution of different stakeholders, including institutions and technology coming together to make this happen.