Same Day ACH: Impacts At The Intersections

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On Sept. 23, the industry welcomed the rollout of ubiquitous faster payments to every consumer and business in the U.S. via all banks and credit unions. NACHA’s launch of Same Day ACH ushered in three settlement windows, enabling ACH payments to be received same day.

In the previous episode of NACHA’s Countdown to Same Day ACH podcast series, NACHA President and CEO Jan Estep identified the overlaps, complements and implications of all the initiatives under the faster payments umbrella — namely, real-time payments, Same Day ACH and blockchain.

In this week’s last and final installment of the series, George Throckmorton, Managing Director for NACHA, took the conversation one step further — exploring the impact of other payments initiatives, such as tokenization, APIs and ISO 20022, that are also supporting innovation across the ACH Network, which now moves money faster and smarter with the introduction of Same Day ACH.

The Road To Process Improvement

ISO 20022, which is designed to set the tone for global financial industry messages, provides a standardized approach to building messaging standards across financial services.

As Throckmorton pointed out, it’s not about moving money but more about making processes better, more standard and more secure.

Though the set of global business standards have been around for some time, ISO 20022 still has the ability to enhance how payment messages are sent and received.

Throckmorton explained that ISO 20022 is not new to NACHA; there’s been an increased interest from businesses to have this flexible option of using ISO formatted messages.

“They are trying to maintain interoperability from a global perspective and also trying to achieve that standardization,” he explained. “In addition, when thinking about faster payments, there’s still a need and a real desire for receivers of those payments to receive information about the payment.”

The growing interest in ISO has come from businesses wishing to reduce costs, gain efficiency and have standardized flow for how these messages are working through that entire platform, Throckmorton added.

NACHA offers an ISO 20022 Mapping Guide to businesses that enable them to send ISO formatted messages to financial institutions that can then move those payments and information through the ACH Network.

With Same Day ACH now in play, Throckmorton said the focus will be on creating additional efficiencies now that money is being moved faster.

Innovation On Old Initiatives

Much like ISO 20022, tokenization is not a new concept for NACHA.

Though it’s become a big buzzword across payments, the use of tokens to disguise and safeguard sensitive information is much more than just a trendy security tool.

Throckmorton noted that the ACH Network has used tokens for a number of years and that now, with faster payments, the interest in them has increased from both businesses and consumers.

“Consumers have a growing interest to protect their information, whether it be on a mobile platform, with a merchant or biller,” he explained.

Now more than ever, especially in an increasingly mobile landscape, tokens have become a sought-after option because they are user-friendly, while also able to protect the companies that are originating payments.

NACHA is continuing to look at tokenization and better understand the implications on all parties, looking at the investment in the technology, the advantages and reduced risks it provides.

In addition to that, Throckmorton said NACHA has the ability to reach out to the industry about tokenization through its Payments Innovation Alliance, which is made up of a diverse set of stakeholders, including corporates, service providers, financial institutions, etc.

“That group takes a deeper dive and really looks at the individual use cases, provisioning options and any further impacts that they might see that could potentially happen with ACH payments and beyond,” he added.

APIs are also another significant force in supporting innovation.

The technology enables a very small amount of code to be used by systems to talk to each other, whether they be legacy or just disparate systems where connectivity is needed.

In faster payments, APIs are being developed faster, at less cost and in an open environment to support innovative products and services, Throckmorton noted.

Whether it be specific to user experience or improved security, there are already a number of ways these APIs are being used to spark change across the industry.

“I really think that’s where we’ll see the most innovation in the coming years, is with this API strategy — both with financial institutions and nonfinancial as well.”