The National Automated Clearing House Association and the Federal Reserve banks are joining forces for the first time to promote electronic services for consumers to pay bills.
The marketing program will be a multiphase, nationwide attempt to build automated clearing house transaction volume.
It is estimated that 20 billion such bill payments are made each year, but only a fraction now flow through the ACH network.
Nacha and the Fed have independently promoted ACH-based services for several years.
The organizations are convinced that together they can persuade more utilities, mortgage companies, and other payment receivers to develop automated bill payment options for their customers.
The joint effort is to be announced this week at Nacha's 1995 annual conference in New Orleans, whose theme, appropriately, is "Forging Alliances."
Industry observers say financial institutions and corporations have several good reasons to encourage bill payments through direct debiting of payers' accounts. These include improved customer convenience and cost reductions from the elimination of paper.
Nacha said about 800 million direct debit bill-payment transactions occurred last year. Total private-sector debits last year rose 13.9%, to 914 million. Commercial credit volume was 1.03 billion, up 20.3%.
Elliott McEntee, the ACH association's president, said the joint marketing push will occur in three parts.
The initial phase will begin next quarter with a promotional campaign aimed at banks.
The effort will expand in the following quarter to include a "corporate awareness" campaign. The Fed will have a lead role in this phase, with many of its payment systems experts taking time to educate corporate billers.
"We, the Federal Reserve banks, will be making contact with corporations across the country to let them know that the Fed is interested in a more efficient payment system," said Paul Connolly, first vice president of the Federal Reserve Bank of Boston.
Mr. Connolly, who is also the retail payments director on the Fed's management committee, said the central banking system will contribute "some of our best people" to work with Nacha.
Mr. Connolly said one of the his priorities as retail payments director is to develop sound and efficient check and ACH payment systems.
The printing, mailing, and delivering of well over 60 billion checks each year cost the equivalent of about 0.5% of the U.S. gross domestic product, he said.
"If it's somewhere between $30 (billion) and $60 billion dollars, then all of that cost is borne by the users of the payment system, which is you and me," Mr. Connolly said.
In the final stage of the campaign, beginning in the first quarter of 1996, Nacha and the Fed will implore banks to promote direct payments directly to customers.
"We are looking at developing public service announcements, and we also will be running articles in newspapers all over the country," Mr. McEntee said.
Nacha will continue its long-standing drive to promote direct deposits - it claimed to generate a huge response from a public service campaign with the Social Security Administration - but will shift more of its marketing resources to the direct payment campaign.
Discussions began late last year when officials of the two organizations met to consider ways of improving and enhancing the ACH network, which is a computer-based settling and clearing method for interbank exchanges of debits and credits.
The ACH network was designed in the 1970s as an efficient alternative to the proliferation of checks that were swamping banks' back offices. Officials concede that the ACH has not delivered on its promise, given the fact that check writing is still on the rise.
Mr. Connolly said barriers to greater ACH usage include a lack of awareness, and inertia.
The Nacha-Fed collaboration was inspired by the success in 1991 of a local promotion by the Cleveland Federal Reserve Bank and the Mid-America Automated Payments System.
Their campaign boosted participation in an automated bill payment service from 15,775 households in 1992 to 103,622 last year.
"In my belief, communication with all the participants on a regular basis made it a success," said Michael Taipale, product development analyst with the Federal Reserve Bank of Cleveland.
