ORLANDO — Though the Check ACH Coalition has abandoned its plan to create a new payments system linking image exchange networks and the automated clearing house system, its members are still working to make the two formats more compatible.
Three coalition members said Tuesday during a presentation at the Bank Administration Institute’s 2007 TransPay conference here that the group is considering legal and regulatory approaches to smoothing out the differences between the two payment formats.
They said that legal obstacles and technological hurdles played a significant role in their decision last month to drop plans to test the proposed payments system, along with growing evidence of widespread industry adoption of image exchange, which could have made such a system largely unnecessary.
“We do believe there still is a problem to be solved,” John G. Feldman Jr., a senior vice president at Bank of America Corp., said during the presentation.
Mr. Feldman, representing the large banking companies that started the coalition, was joined by Viveca Y. Ware, the director of payments policy at the Independent Community Bankers of America, representing smaller banks, and Brad Ganey, the director of item processing at Southwest Corporate Credit Union in Plano, Tex., representing credit unions. The Check ACH Coalition was formally introduced to banks’ check-operations executives at the same conference last year.
The goal of the project was to enable banks that are using image technology to settle checks electronically with those that are not by routing payments data across the ACH network.
Mr. Feldman said that check and ACH systems are converging, with checks being converted into ACH transactions at the corporate lockbox, the point of purchase, and, beginning next month, in merchants’ back offices.
The coalition had wanted to develop its new clearing system using Regulation CC, which covers checks, rather than the ACH-governing Reg E. But Ms. Ware said the group’s lawyers warned that the strategy would require a more deliberate approach, and perhaps legal or regulatory changes, which would prolong the project.
“There was a concern that moving a check via ACH could violate the spirit of Check 21,” Ms. Ware said. And handling such transactions under check rules also raised other stumbling blocks, she said. For example, “an institution would need the ability to opt out. But if you had institutions opting out, it would defeat the purpose of clearing using ACH.”
The coalition plans to produce a final report in the next few weeks.
While the coalition was wrestling with its plans, image exchange was gaining speed. Seventy-five percent of ICBA members responding to a survey it conducted in late 2006 said they planned to adopt image technology in the next three years, and the holdouts represented only 7% of the industry’s volume, making the Check ACH solution “problematic” compared to the size of the problem it was to address, Ms. Ware said.
Half of nonadopters said in the survey that they outsourced both their check clearing and archiving anyway. As a result, “the last mile,” Mr. Ganey said, “was not as long as we might have thought initially.”
He said he expects a future role for the coalition, which includes rulemakers and regulators as well as a variety of operations staffers from institutions.
“What other forum out there brings that group together?” Mr. Ganey said. “You want to keep those people at the table. We’ve got to keep collaborating, not just check people, not just ACH people, but check and ACH people together.”
