An Interbank Fee Is a Fly in the Ointment for Retailers Reacting to Same-Day ACH Idea

Merchants that have spent years battling card-acceptance fees are turning a jaundiced eye toward a proposal to speed up payments on the nation’s automated clearing house network.

That’s because the same-day settlement proposal, floated in December by NACHA, the ACH’s rules-setting organization, contains a so-called interbank fee that, for some merchant groups, bears a little too much resemblance to the interchange fees acquirers pay on card transactions and then pass on to merchants.

Under NACHA’s proposal, the 8.2-cent interbank fee would flow from originating banks to the banks that receive ACH files for same-day settlement. The fee’s purpose is to reimburse receiving banks for systems costs and other expenses related to the move from next-day settlement.

Originating banks would likely pass all or most of the fee on to their merchant clients, much as acquirers pass on interchange costs for card transactions.

But two big merchant groups that filed comments on the NACHA proposal object that the fee is too high and represents, like interchange, another cost imposed by a network entity without negotiation between the banks. “We do not believe the market will bear the proposed 8.2-cent interbank fee level,” says an eight-page letter to NACHA from the Merchant Advisory Group, a Minneapolis-based trade group that represents 90 big-box retailers, gasoline marketers, and airlines.

In its own comments, the National Association of Convenience Stores argues the fee would “double the costs of an ACH transaction for some of our members,” leading them to “question the value of accepting ACH transactions.” A long-time critic of interchange fees on cards, Alexandria, Va.-based NACS represents more than 2,200 retailers and 1,800 supplier firms.

The MAG letter points out that an originating bank currently pays between 0.25 and 0.3 cents to send an ACH item, while a receiving bank incurs a cost of 0.25 cents. Against that background, the letter says, the proposed interbank fee represents “a tremendous fee increase” that will discourage many merchants from using the same-day service.

But it’s not just the fee amount that bothers these merchant groups. They also object to the idea of price-setting by a central authority, in this case NACHA. The NACS letter likens such authority to that exercised by Visa Inc. and MasterCard Inc., which establish interchange rates for the bank card system. Instead, fees should be reached by negotiation between banks, the group urges. “Price should be set by individual competitors rather than a central body,” says the letter. “NACHA setting the prices that all banks will charge for ACH amounts to price-fixing with NACHA as the hub in a classic hub-and-spoke conspiracy.”

As a result, the arrangement violates antitrust law, NACS argues, and “destroys the ability of banks to compete on price.”

Merchants have long contested card interchange on antitrust grounds. Indeed, a massive case brought by merchants accusing networks and banks of price-fixing in setting interchange was settled only in 2012 after wending through the courts for seven years.

Pricing aside, the two letters applaud the idea of speeding up ACH transactions, though they both argue NACHA should be aiming for real-time settlement instead, a concept that other organizations, such as bank-owned The Clearing House Payments Co. LCC, are pursuing.

NACHA’s proposal requires receiving banks to handle same-day settlements, and envisions the interbank fee as a means of ensuring all banks will participate. Under the proposal, the fee cannot increase and is subject to periodic reviews.

The proposal calls for same-day capability to be phased in in three steps over an 18-month period starting in September 2016 and ending in March 2018. The steps would introduce multiple settlement windows during the day and would include both ACH credits and debits. If NACHA members approve the proposal, the network will handle almost 1.4 billion same-day payments annually within 10 years, NACHA forecasts.

“While retail [point-of-sale] ACH transactions make up less than 1% of ACH network volume today, other changes to the network over the years—for example, check conversion—have greatly supported retailers in how they are able to efficiently use the network, and we will continue to work diligently to listen to and understand all participants’ views,” says NACHA president and chief executive Janet O. Estep in a statement sent to Digital Transactions News in response to the MAG and NACS comments.

“Our same-day ACH proposal has been widely supported, and our Rules and Operations Committee is reviewing all feedback and outlining a workable implementation as we move forward,” Estep says.

NACHA says it received 43 comment letters and 181 survey responses from 214 responding organizations (some organizations submitted both a letter and a survey response). The comment period ended Feb. 6.