It's going to be a transitional year for NACHA, says chairman Steve Ellis, who is also an executive at Wells Fargo. The new back-office conversion rule kicks off in March to permit new check electronification options. New transactional fees are being applied by NACHA - about $100 per 580,000 transactions - to offset administrative costs and pay for additional risk management programs. NACHA is also working on strategies to further adapt online services to the ACH network. For Ellis, 2007 has already been a pivotal year: he wrote the last check he (hopefully) ever has to sign.
What is the outlook on back-office conversion adoption?
My view is it will move relatively quickly. The big driving force here is that people move from paper to electronic...as business customers and most consumers are moving rapidly to cards and away from cash and checks.
Look at it compared to something like ARC: ARC can do millions of checks at once, so you might see the same kind of volume; ARC has grown 30-40 percent a year, but it's with a big dollar amount [per item]. You're going to see back office conversion hitting not just those companies that do large checks, but everybody. I think it's going to have a strong penetration across the industry in a three-year period.
How is that going to impact banks and their clearing operations?
For banks, it creates a level of complexity around the way that original piece of paper flows through this system. Banks need to make modifications to their settlement systems as well as their reporting systems that go back to the check writers. That is not trivial.
Could a commercial client's remote deposit capture service be easily modified to provide BOC?
Absolutely. For people using desktop deposit service, some have customers mailing in checks to them, and they have converted [those] consumer checks to ARC that were eligible for conversion already. So, I think that's an easy switch at the customer side, which is one reason why adoption will be relatively quick here.
What kind of convergence do you see for remote deposit capture?
Those boxes and services are already beginning to morph into what I would call a quasi-remote lockbox service vs. a deposit service. The ability to scan coupons with those checks as they come in already exists... and I think what you'll see "next-gen" is some cleaner reporting-so you can limit exception-and more automated services. There's the ability to [convert] automatically and the ability to use different kinds of scanners that we'll be able to use for the check and remittance matters. I think you're going to see over the next two to three years that the way the process works, and the equipment you need, is going to become less specific.
Did you expect RDC to generate the kind of interest it has?
I would say that the volume we've seen is not that far off from what [Wells Fargo] hoped would happen. We expected this to be more of a medium-sized company service...but we found it penetrated well across companies of all sizes. We thought originally it would be more for customers who weren't close to a branch. But we found that didn't matter as much. The ability to do the deposit inside customer workflow was a much bigger deal...so those are some of the things that were nice surprises. If there was a downside...it's been more on how to deliver the images, or the IRDs, through the payments system...and how standards, images and that process would work. That has been a little bit more work than it needed to be.
Have those problems primarily been around image quality?
I think it's about image quality, and defining that in a way where everyone can [match]. You can get an image file, and all the images are upside down. There are the little technical things that you don't think them through up front.
What's NACHA's current focus in online and mobile payments?
With the online payments pilot, the idea there is to leverage the authentication /authorization infrastructure of banks, to keep the customer's account information with their bank and leverage how they authenticate and authorize so they're not sending any info out if they're at a retailer site. We've done a technical proof of concept already.
There's nothing that NACHA has teed up as a big-time project for mobile payments today, but we do have a project on bill payment in helping businesses move their bill information to their customer through ACH.
What are factors pushing the industry to all-electronic settlement?
You'll see a huge reduction in checks used at retailers and places like that, and replaced by credit cards and debit cards. The last few years, you've seen gift cards really accelerate. The movement online, coupled with cards, translates to a different behavior pattern that people set. I still see occasionally people writing checks, and it surprises me...I can buy things online, pay my bills online. These things are pushing people away from checks and cash, and I don't see that stopping. Checks don't go away, but they become a minor piece of the equation.
When was the last time you wrote a check?
I write a check once a month for my monthly parking in this building I'm in. Originally they wouldn't take my commercial card. Now they do, but we're moving buildings. So I wrote my last check, hopefully, this morning. (laughs).
