Wells, BofA Walk Away from Pariter, Their Joint ACH Processing Platform

Three years after introducing a joint venture aimed at processing automated clearing house transactions between the two banks, Wells Fargo & Co. and Bank of America Corp. have abandoned the operation, which they called Pariter. “It will shut down over the next few weeks,” a Wells spokesperson tells Digital Transactions News. “It will take a few weeks to figure out what the specific impacts are.”

The two big banks, both of which rank among the top three originators and receivers of ACH transactions, apparently reached their conclusion to end Pariter as a joint decision. “It was a mutual decision, amicable,” says the Wells spokesperson.

Several factors that have intervened since the spring of 2008, when the two banks announced Pariter, figured in that decision, the spokesperson said. These include the worldwide financial crisis and large acquisitions made by both banks that stemmed from that crisis and absorbed much of the institutions’ resources. BofA bought Merrill Lynch and Wells took over Wachovia. “Both companies made big acquisitions that changed the fundamentals,” the spokesperson says, adding the acquisitions changed the banks’ technology needs. “Wells Fargo’s strategy is still to pursue automation of ACH [traffic], but we expect it to be more efficient, and we expect to be better able to serve clients, on our own.”

The spokesperson stressed that the decision to close Pariter was not related to the recent move by the two banks, plus JPMorgan Chase & Co., to launch clearXchange, a person-to-person payments venture that uses the ACH for settlement.

Pariter’s introduction three years ago came with considerable fanfare, and not a little speculation in the payments industry over the possible impact the venture could have. Some observers speculated that the venture could ultimately process for more banks and grow to become a third network operator, or switch, for the ACH. Currently, the Federal Reserve and one private-sector company, New York City-based Electronic Payments Network, a unit of The Clearing House Payments Co. LLC, serve as the ACH network’s two operators.

The announcement of Pariter also came as some industry observers had raised concerns about direct exchanges, or arrangements among banks to trade volume among themselves rather than through the ACH operators. While such exchanges can be cost-efficient, they also siphon volume out of the network, making risk management less effective, observers argued. In the case of Pariter, the two banks would have formed a platform to process payments received by customers of one of the banks that drew on accounts held by customers of the other, in what is commonly known as an on-us arrangement.

“This [Pariter] could have been viewed as a potentially harmful factor developing,” for the ACH, says Bob Meara, a senior analyst at Celent LLC. Now, he says, that specter has been put to rest. “What it means is that all those who said we could have some real competition here [for the ACH operators], a decline in volume for the Fed and EPN, that’s not going to happen,” adds Nancy Atkinson, a senior analyst at Aite Group LLC.

The two banks have been largely silent about Pariter since the announcement in 2008, and that silence, combined with the intervening financial crisis, led many observers to conclude the banks were no longer focused on the venture, leaving the decision to abandon the venture as no surprise. “They just haven’t been able to focus enough on Pariter to make it happen,” says Atkinson. “What happened was the timing was just bad.”