New Group Will Hammer out Rules for Cross-Border Online Payments

An international organization set up to promote the concept of allowing consumers to pay online merchants via Web-based banking programs plans to have a structure in place by the third quarter next year to traffic the first payments across borders. The International Council of Payment Network Operators, established earlier this year, expects five members to attend its inaugural meeting in London later this month, where they will begin work on a process the group hopes will culminate in standards addressing such issues as cross-border settlement, exchange-rate mechanisms, and funds movement. The ICPNO expects to hammer out these rules within three to five months, creating the groundwork for a system that would link all networks and allow merchants and consumers in one country to do business with those in another through online-banking systems. The meeting is being hosted by VocaLink, a U.K. bank network that is introducing a payments system based on online bank authentication. Richard Brierley-Jones, a Denver-based executive vice president at payments-software vendor eWise Systems who is acting as the group's spokesman, says that while online payments based on banking sites are still in a nascent stage in the U.S., such programs overseas are building momentum. He cites the Ideal Network in the Netherlands, a 3-year-old, bank-controlled system that processes about half of all online payments in that country. “That's true hockey-stick adoption,” he says. “A very steep hockey stick.” All told, Brierley-Jones estimates there are 10 such systems worldwide up and running, including Secure Vault Payments (SVP), a U.S. program launched on the automated clearing house network this spring by NACHA, the Herndon, Va.-based group that regulates the ACH. Some 200 million consumers have access to these networks, he says. But, he says, “one piece is missing, and that's interoperability.” While some details differ, these programs are similar in that they allow an online-banking customer to switch to his bank's Web site from a merchant's site and use his bank account to send funds to the merchant in payment for an order. With SVP, funds are guaranteed to the merchant and there are no chargebacks, since customers authenticate themselves using their online-banking credentials. Banking regulations differ from country to country, as well, but Brierley-Jones says the ICPNO will be working to adapt existing rules rather than trying to craft new ones. “This about saying, how do we join these networks together, and how do we comply as a single network,” he says. With interoperability, merchants will reach more customers and customers will be able to use their bank accounts to pay online stores in other countries, Brierley-Jones argues. With interchange pricing in place, as is the case with SVP, authenticating banks could see a rise in fee-based online-banking usage. EWise could also benefit, since it provides the switch for SVP and is in discussions with other networks. But for its part, NACHA is taking a wait-and-see approach. It is sending a representative to the London meeting as part of “fact-finding” mission, says George Throckmorton, senior director for payment solutions at NACHA. Having just launched, SVP has signed up a few online merchants and some banks, including Synovus Financial Corp., a Columbus, Ga., holding company for 39 financial institutions. And it has found interest among college administrators looking for a new way to collect tuition payments (Digital Transactions News, Aug. 25). But for now, Throckmorton says, its priorities are all stateside. “We need to continue to look at the globalization of payments,” he says. “But from NACHA's perspective, it's way too early to tell” when SVP might become part of a global network. “It's not on the road map at this point,” he says.