At Nacha Show, Wal-Mart Demands a Place at the Table for Nonbanks

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AUSTIN, Texas — Wal-Mart Stores Inc. is agitating for nonbanks to have more say in how the automated clearing house network is run.

Executives of Wal-Mart, which has had its share of run-ins with the payments industry, said here at Nacha's annual conference that banks have dragged their feet on potential rule changes that could benefit retailers and other nonbank companies.

Jason Marshall, the Bentonville, Ark., retailer's senior director of payment services, suggested that companies like Wal-Mart should be given voting power over ACH rules that are set by Nacha, the electronic payments association. "Nonbanks should have the opportunity to be direct members, to have votes on operating rules and to be eligible for [Nacha] board membership," Marshall said in an interview.

During an earlier presentation Monday at the Austin conference, Marshall chided the group for focusing too much on achieving consensus among the banks before making rule changes. That, he said, has slowed development of payment products. If banking industry outsiders had a place on the board, they could fast-track these changes, he said.

"If we expanded the way we govern Nacha … we'd also be able to attack some of the industry's resistance to change," Marshall said during the presentation.

Merchants "have to have a more direct voice," he said. "After all, we're paying for it all. There's not a single investment that a bank's making that's not being paid for by a [nonbank] corporation."

Wal-Mart has not had a "formal" discussion with Nacha leadership about its suggestions, but it wants to have more dialogue about the issue, Marshall said.

Wal-Mart is a member of Nacha's councils on check electronification and electronic billing, Marshall said. These councils do not have voting power on ACH network rules.

Wal-Mart, the world's largest retailer, has campaigned for years for cheaper banking services. It has battled with card networks and banks over interchange fees and stands to be one of the biggest beneficiaries of the pending regulatory caps on debit interchange resulting from the Dodd-Frank Act.

It scrapped an application to charter an industrial bank in 2007 amid industry opposition. Today Wal-Mart is one of the biggest sellers of prepaid debit cards, through a partnership with General Electric Co.'s GE Money and Green Dot Corp.

Marshall's presentation before a room filled mostly with bankers and vendors was met with both agreement and skepticism from audience members.

Some asked what Wal-Mart would change about Nacha's structure. Marshall did not give many specifics but said nonfinancial businesses should get a seat on the board to have more direct say over decisions that affect not only banks, but also their customers.

The right to vote on operating rule proposals is reserved for Nacha's direct members, which can only be financial institutions. Regional payments associations, which represent financial institutions, are also allocated a certain number of votes, said Mike Herd, the managing director of ACH network rules at Nacha.

Employees of direct members can serve on the board, which also has three positions reserved for financial institution members of Nacha's various councils, a Nacha spokeswoman said. (The councils themselves are open to nonfinancial institutions and focus on specific industry issues.)

Nacha executives said no proposals are being considered to give voting power over ACH rules to nonfinancials or give such companies a seat on the board.

Several years ago Nacha's board included a seat for a nonbank, but that position was phased out, according to George Thomas, a principal with Radix Consulting Corp. in Oakdale, N.Y.

Marcie Haitema, a former chairman of Nacha's board who has worked for JPMorgan Chase and is now a private industry consultant, said board members must put industry interests ahead of their individual agendas. "As a Nacha board member, you have a fiduciary responsibility" to the organization and the industry as a whole, Haitema said. "You cannot be there pushing what's best for the bank."

David Bellinger, the director of payments for the Association for Financial Professionals, agreed that nonbank businesses should have a direct involvement in rulemaking.

"We at least as corporates need to make it clear what corporates want … as the folks that really do pay for the services that banks are providing," Bellinger said.

Bellinger said Nacha does actively solicit comments from industry stakeholders when considering rule changes. However, decision-making at the board level would benefit from having nonfinancials represented, Bellinger said.

Marshall said a lack of consensus among banks has prevented the rollout of new ACH payment services or has watered down services that merchants want, such as a same-day ACH settlement.

In August the 12 regional Federal Reserve Banks, which collectively serve as one of two ACH operators, introduced same-day settlement for their FedACH service. Banks have been slow to adopt the same-day service (which is designed under existing ACH rules), because it is offered on an opt-in basis, it is limited to a handful of ACH transaction categories and can only be used to conduct debits, not credits. The Clearing House Payments Co. LLC, the other ACH operator, does not offer same-day settlement.

Nacha is studying potential changes to the timing of transaction settlement on a broader scale. "Nacha is taking steps to evaluate that offering and working with others to analyze possible ways that our shared infrastructure can support such changes," Janet Estep, its president and chief executive, said during the opening session Monday. It is "hard to imagine a future without settlement times changing" from what "they have been for the past 35 years."

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