The Hottest Trends in Payments Taking Place in the ACH Now!

Transcription

2 NEACH, as a Direct Member of NACHA, is a specially recognized and licensed provider of ACH education, publications and support. Regional Payments Associations are directly engaged in the NACHA rulemaking process and the Accredited ACH Professional (AAP) program. This material is not intended to provide any warranties or legal advice, and is intended for educational purposes only. NACHA owns the copyright for the NACHA Operating Rules & Guidelines. Any unauthorized use or access is expressly prohibited. This presentation is copyrighted. Any unauthorized reproduction, reuse or rebroadcast is expressly prohibited. Please contact the NEACH Education Department for more information.

3 Today s Discussion Strategic Initiatives Products and Volume Removal of Barriers Risk and Enforcement

4 5 Where does NACHA want to Go? Faster Payments Innovation ACH Formats Remittance Data Faster Payments is one of eight attributes of the future ACH Network, according to NACHA s ACH Blueprint of ACH Credit Payments Cross- Border Interoperability User Enablement Routing Data Verification 2014 NACHA The Electronic Payments Association. All rights reserved. No part of this material may be used without the prior written permission of NACHA. This material is not intended to provide any warranties or legal advice and is intended for educational purposes only.

5 Concept Up to 3 additional ACH Processing Windows Additional A.M. and P.M. windows as well as 3 rd window for West Coast participants Phased Approach to help spread investment costs Interbank Fee to help recoup investment costs for RDFIs and allows for ODFIs to charge for a premium service

6 Inter Bank Fee Proposal includes for the rules to calculate an inter bank fee to be passed from the ODFI to the RDFI of the same day transaction Methodology for the fee was too help RDFIs recover the costs of implementation over a period of 11 years. Fees need to be set so that the price does not preclude folks from originating same day transactions

7 Inter Bank Fee Proposal ends up calling for an 8.2c fee per transaction to be paid by the ODFI to the RDFI Rules will not require or prohibit either an ODFI or even an RDFI from charging account holders for services related to same day ACH ACH Operators will handle the process of debiting the ODFI and crediting the RDFI

8 Inter Bank Fee Numbers used in the proposal for the industry 118 MM in initial costs 6 million annual cost in 2016 goes to 49MM in 2027 RDFI lost opportunity grows with transactions from 1 MM in 2016 to 43 MM in 2027 Volume projection of 1.4 billion SD transactions annually in 2027

9 Where are the costs? Implementation Review of current system capabilities and processes Update systems across the ACH program ATM, Online Banking & Branch Services such as EDI and ACH Positive Pay and Debit Blocks Receiver and Originator Training Disclosures Contracts User Manuals On going Transaction costs Employee time

10 Use Cases 10 Primary cases and 63 sub cases are identified in the proposal B2B B2C C2C C2B

11 USE Cases The Inter Bank Fee just calculates what an RDFI would receive as it relates to the receipt of a transaction but does not take into account the revenue opportunities presented to an RDFI because of same day capability

12 B2B Removing Barriers

13 Directories

14 Directories The Remittance Coalition is a group of organizations and individuals working together to promote greater use of electronic business-to-business (B2B) payments and electronic remittance data exchanges. The Coalition accomplishes this objective by addressing various problems and barriers that make it difficult for businesses to use electronic alternatives to paper checks and remittance advices.

15 What is the B2B Directory? Business to Business (B2B) The The Directory B2B Directory will be will accessed serve as a Directory is envisioned as a database from utility. a It central will store, point, manage, but will and be of look up payees. the It electronic will allow payers information to find architected as a directory of the (i.e., information the identity ) needed of a to payee, make directories. Accordingly, it will payments including account to their payees connect numerous and hosting payment electronically directories information. that The list main their goal own of the payees B2B Directory ( Host Directories ). is to help U.S. Each Host corporations Directory increase will provide their use of trusted, domestic validated electronic information payments and about related their business payees. information to their business payees. B2B Directory Concept Paper September 2014, Remittance Coalition,

16 What is the B2B Directory? The Business to Business (B2B) Directory is envisioned as a database of payees. It will allow payers to find the information needed to make payments to their payees electronically. The B2B Directory will serve as a utility. It will store, manage, and look up the electronic information (i.e., the identity ) of a payee, including account and payment information. The main goal of the B2B Directory is to help U.S. corporations increase their use of domestic electronic payments and related business information to their business payees. The Directory will be accessed from a central point, but will be architected as a directory of directories. Accordingly, it will connect numerous hosting directories that list their own payees ( Host Directories ). Each Host Directory will provide trusted, validated information about their payees. B2B Directory Concept Paper September 2014, Remittance Coalition,

17 Current Initiatives NACHA EBIDS Payments Innovation Alliance, Improving Access to the ACH Network Remittance Coalition Proof of Concept (tentative)

18 NACHA-EBIDS NACHA The Electronic Payments Association and The Clearing House (TCH) are offering EBIDS as an Automated Clearing House (ACH) product to increase the availability of electronic bills for consumers. EBIDS allows businesses to deliver ebills to online banking accounts for presentment to consumers and to receive authorized credit payments through the safe and secure ACH Network.

19 NACHA Payments Innovation Alliance Improving Access to the ACH Network (again) Creating ideas to change how to improve the Network Passing off to NACHA and workgroups to address the ideas Socializing idea on Directories Lots of general discussion including tokenization and the future of directories

20 Remittance Coalition The Remittance Coalition s objective is to increase the efficiency with which business-to-business payments are made and reconciled by all types and sizes of U.S. businesses. The Coalition will accomplish this objective by promoting more unified standards, processes and common automated tools that support: (1) Using more electronic payments for B2B transactions, and (2) Originating and delivering electronic remittance data that can be associated easily with the payment. we do/payments information/remittancecoalition

21 Barriers Many providers of Directory Services Basic problem is Monetizing the sharing of directories

22 Game Changer? 14. How does the Federal Reserve plan to support further adoption of electronic B2B payments? The Federal Reserve intends to work with stakeholders to address barriers to electronic payment adoption by businesses. As appropriate, we will: Collaborate with stakeholders to develop and implement a directory to support B2B electronic payments; Work with banks, other service providers and small-business experts in 2015 to develop and implement education, including toolkits targeted for use by financial institutions and large businesses to enable counterpart small businesses to adopt electronic alternatives for payments and related information; Develop and promote simplified, common guidelines to make it easier to implement and use B2B standards for electronic payments and related information; and Explore the possibility of developing and implementing a standard, ubiquitous B2B electronic invoice and processing platform similar to ones that have been developed in other countries. work/strategies paper/frequently askedquestions/

23 What s the deal with ISO 20022?

24 What is it? ISO is Hot! Large US Banks and Companies are actively adopting it If used across all channels simplifies processing Adopted in Europe Faces a lot of challenges in the US

25 Ok, Really What Is It? An ISO (International Organization for Standards) standard for financial services messaging Uses Universal Modeling Language syntax Syntax allows for use of XML EDI 40\ST*820*000010\BPR *C*55241 XML <Dbtr> <Nm>ABC Corporation</Nm> <PstlAdr> <StrtNm>Times Square</StrtNm> <BldgNb>7</BldgNb> <PstCd>NY 10036</PstCd>

26 Federal Reserve Research Federal Reserve Study, October 2013 Basically said: There is no mandate or industry deadline, which may impede adoption More benefit to larger global organizations May be strategic reason to adopt Concluded with 3 phases Planning & Education Enable Cross-Border Payments (Fedwire/ACH); Assess Value proposition for domestic payments ontent/uploads/iso_20022_business_case.pdf

27 What s Happened Since Fedwire Working on analysis and some mapping NACHA Opt-In Program testing XML usage

28 Barriers Does size matter? Technology investment Is it a solution seeking a problem Very much depends on viewpoint & customer base

29 Game Changer? 13. The ISO assessment suggested a weak business case for implementing the standard in the U.S. Why are you still moving forward? There are several strategic reasons that make a strong case for considering adoption of ISO in the U.S. market: Global Momentum: Large U.S. corporates and banks are actively adopting ISO 20022, and that is expected to continue. Global Competition: Compatibility enables the U.S. to maintain parity with other global markets and U.S. dollar clearing systems in other jurisdictions that are adopting ISO messaging, which may help preserve the attractiveness of the U.S. dollar as a global currency. Cost Savings and Processing Efficiency: Standardizing message formats allows for consolidation of payment platforms at banks and corporations, which could promote straight-through processing and drive down costs. Consistent and Rich Data: The ISO format enables all parties to leverage a common set of data dictionary elements and expands capacity to carry rich data in the payment message. Interoperability: A common format promotes ease of transacting domestically and globally by using a single, open standard rather than multiple proprietary standards. Agility to Meet Evolving Regulatory Needs: The ISO format provides for full originator and receiver information (third-party or ultimate beneficiary) allowing for improved regulatory reporting and monitoring. New, Innovative Products: A common format across systems reduces the amount of change required to bring innovative new products and services to market. work/strategies paper/frequently askedquestions/

30 Risk and Enforcement

31 Exchange of Protected Information Data Security NACHA is socializing an idea that would eliminate minimum security standards in the rules and replace that with a general reasonable security provision PCI council looking to boot the use of SSL as a transmission for card information Would that change the expectations on an ACH Payment under Reasonable Security Guidelines Data-Security-Could-Get-the-Boot-From-the-PCI-Council 31

32 Cyber Security FFIEC Guidance Corporate Account Take Over Board Statement FFISAC and FBI Collaborative materials NIST H.R Cybersecurity Workforce Assessment Act S National Cybersecurity Protection Act of 2014 S.1353: Cybersecurity Enhancement Act of 2014

33 Payment Processors and Third Party Senders Identification and management of origination relationships Enhanced on-boarding techniques Enhanced transactions monitoring Enhanced reporting of origination activity Creation of Third Party Sender Audit Policies What do you want to see? When and how often do you want to see it?

34 Payment Processors and Third Party Senders NACHA is socializing 2 ideas specific to Third Party Senders Requirement to register specific information Certification by NACHA of Third Party Processors Does this make that type of business more acceptable? Does additional compliance obligations offset the potential benefit or NACHA certification? Question to Ponder: Why do so many companies seek out third party payment processors? 34

35 Enhanced Monitoring & Unauthorized Does NACHA establishing an overall return rate and rate for administrative returns as well as lowering the threshold for unauthorized return rates make you think about more formal or automated monitoring? Options ACH Operator Tools Third Party Providers Core BSA Software Vendors Fees 35

36 Government Payments PPP Post Payments Portal Government is going to be automating and providing FIs with reports for DNEs, Returns and Reclamations Removing the paper process used for handling NOCs by the agencies A portion of the program will be rolled out in September and finished product by 2017 Connectivity has not been addressed so you may need to upgrade systems to be on board at a minimum you will need to change procedures for handling reclamations 36

37 Questions and Answers Discussion 37