It has become a cliché in this business to say that mobile changes everything. But in one respect, at least, it certainly does. With mobile apps, we’ve been conditioned to expect instant access to Web content served up in configurations that are most useful to us right now. A shopper, for example, is no longer content to take days to check ads and call stores to gather competitors’ prices for a new refrigerator. Not when she can get the information in real time on her smart phone while she’s standing in the aisle.
That’s how mobile changes everything for payments. By delivering instant gratification to consumers, it creates pressure to make transactions happen now. That’s why the automated clearing house network missed a huge opportunity in August when its members voted down a proposal to shave settlement time on both credits and debits from next day to same day.
Granted, as a proposed rule change the measure had a very high hurdle to clear: 75% had to vote “yes” for the rule to be enacted. But reportedly the ACH’s biggest banks were the most opposed. They fear same-day ACH could threaten their lucrative wire-transfer franchise, and aren’t convinced they can make enough revenue from a same-day service to cover its expense, according to sources. If this is true, their “no” votes will be recorded among the most short-sighted moves in the history of electronic payments.
NACHA, the rule-making body for the ACH, may try again, and this time it might succeed. But in the meantime one of the world’s most useful payments networks, with links to just about every financial institution in the country, has sidelined itself in a crucial arena where processors and technology companies are already working to speed up funds movement in preparation for the ubiquity of mobile. Indeed, by the time the ACH gets around to it, same-day settlement may not be fast enough. The emerging push now is for real time.
In June, the Iowa-based payments startup Dwolla began offering a free API to financial institutions that allows users to fund their Dwolla accounts from their bank accounts in fewer than 10 seconds. Dwolla developed the technology out of frustration over how long it took users to load their accounts so they could pay merchants and other users instantaneously.
Now big, established players are taking notice. Last month, Fiserv Inc. said next year it will start allowing holders of debit cards from the Fiserv-owned Accel-Exchange network to make real-time transfers to merchants. Not next day. Not later the same day. Real time.
The world is spinning faster. Time for transactions to do likewise.
John Stewart, Editor
john@digitaltransactions.net