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A recruitment effort began today to find banks, billers, and merchants to participate in a pilot of a new system by which consumers would be able to make payments on the Internet through the automated clearing house. Sponsored by NACHA, the Herndon, Va.-based organization that sets rules for the ACH, the new application would allow consumers to make payments and transfer funds between accounts after logging in to their banks' online banking programs. NACHA, which has had the system under consideration for some time under the provisional name “credit push” (Digital Transactions News, Sept. 30, 2004 and April 13, 2005), issued an announcement of the pilot today and asked interested organizations to contact the association. A spokesman says NACHA is looking for five originating financial institutions and at least 10 companies?including banks, billers, mutual funds, and merchants?to serve as payees. Though some sources say the pilot could start by mid-year, the spokesman says no firm start date has been set. “We're starting today recruiting the participants,” he says. “A lot will depend on them. It's too early to say when we'll have transactions.” He says a mid-year start date, though possible, could be “aggressive.” NACHA's board approved the pilot in late February by a vote of 13 to 4, indicating broad support for the concept at a time when many online merchants are seeking alternatives to credit cards for payments. The pilot follows a technical test of the system NACHA conducted last summer in which several banks routed transactions through a network designed by eWise Systems, an Australian software firm that will also provide networking for the pilot. Participants in this so-called proof-of-concept test included National City Bank and Radio Shack Corp.'s e-commerce operation. The spokesman says the pilot will include a form of interchange fee that will flow from the merchant's bank to the consumer's bank. The latter institutions will be responsible for authenticating their account holders and providing guaranteed funds to payees. “The consumer's bank will be compensated for performing that service,” says the spokesman, though he adds no specific pricing has yet been determined. The possibility of earning income from the new payment application could appeal to banks that otherwise might be leery of its potential to siphon off online credit card transactions, on which they earn lucrative card-not-present interchange fees. Such fears are said by some sources to have helped quash an earlier effort by NACHA, called Project Action, to process Internet payments. The spokesman, however, says the new application should have little or no impact on card transactions. Studies NACHA has conducted indicate that these new payments would be incremental volume. “Consumers that use [credit cards] online will continue to use them,” he says. Indeed, NACHA is investigating the possibility of offering other payment networks the chance to support transactions in the new system. In this scenario, consumers would encounter a screen offering several payment alternatives after logging in with their online bank programs. The spokesman says this is under review and “may or may not be part of the pilot.” In the system as currently designed, a consumer when ready to buy or make a payment on a Web site would click on a buy button that would automatically bring up a log-in screen for her online-banking program. Once authenticated, the consumer would then see a screen showing details of the transaction, including merchant name, items in the shopping cart, and price. Once she authorizes the sale, she returns automatically to the merchant's site. Merchants would receive instructions once the sale was authorized and could then ship the items. They would receive funds the next day. NACHA's existing e-check application for Internet transactions, WEB, has been chiefly adopted for bill payments by companies with strong relationships with customers. The broader market for so-called spontaneous retail transactions has been difficult for WEB to penetrate because of its lack of an authentication method.
