The National Automated Clearing House Association is considering a set of rules changes that it says can save banks as much as $3 billion by 2000.
In a soon-to-be-published report, "Vision 2000," the Herndon, Va.-based association has set out 30 recommendations for the automated payment network's future, ranging from Internet initiatives to a speed-up in settlement schedules.
Nacha, a trade group comprising 35 regional automated clearing house, or ACH, associations, represents 13,000 financial institutions.
Officials at the clearing house group said they believe the proposals, if adopted, will drive more corporate and consumer payments to the network and away from the checking system.
By 2000, Nacha hopes to double the four billion ACH payments that were originated in 1996.
The association's board will begin considering the recommendations within weeks. It plans to vote on each and form work groups to tackle specific projects.
The entire effort could take three years to complete.
"No single event in the history of the ACH can compare to the impact this report will have on the payments community," said Peggy O'Connell Roush, executive vice president of Norwest Corp. and vice chairman of the Nacha board.
The ACH system was organized by the Federal Reserve in the early 1970s to alleviate the burden of processing recurring payments.
From early successes in converting items like Social Security checks in the government sector and insurance premiums in the private sector, the network has branched into corporate-to-corporate transactions and electronic data interchange, among other applications.
But check volume, an estimated 65 billion items written per year, is still growing.
Banking officials who worked on Vision 2000 said they have addressed many of the ACH network's shortcomings in a way that could help it realize its original goal of reducing check volume.
Barbara Utendorf, vice president of Fifth Third Bancorp, Cincinnati, and a member of Nacha's rules and operations committee, said financial institutions already benefit substantially from the cost differential between paper and electronic processing.
Yet "getting users on the corporate and consumer side" to commit themselves to using the ACH network "has been a challenge," she said.
Ms. Roush said among the more ambitious changes in the network would be strict enforcement of Nacha's rules for interbank payments, with fines assessed for violations.
"It needed to have strengthened warranties," she said. "People can have confidence in the system knowing that if" a bank breaks the rules "there is some sort of consequence."
Nacha's recommendations blend rules changes with new service offerings such as Internet-based payment services, an initiative that would include development of digital signatures and certificates for payments over the public network.
Nacha also said a data base is under development that would bypass the problems associated with "checks and lists," or electronically initiated payments that must be converted to paper to be processed.
Although more home banking transactions are moving to the ACH network, most still end up as part of "checks and lists" that are difficult to reconcile, said Elliott McEntee, president and chief executive officer at Nacha.
The proposed data base would know where to send every consumer's bill payment, eliminating the paper requirement.
ACH formats can accommodate account information, and merchants use it to reconcile their receivables.
Nacha is developing compatibility rules with ACH counterparts in Canada and Mexico and eventually wants to broaden the effort to include Europe.
"We have reached an agreement with the clearing house in Mexico, and all the rules have been approved," Mr. McEntee said. "There are still some operational issues to be resolved, but the payments should start flowing in a couple of months."
In about two weeks, Nacha's board is expected to vote on a rule that would require all banks to send electronic data interchange information upon request.
The association is hoping to jump-start a potentially lucrative fee- based service that has not taken off as quickly as many bankers had expected.
An EDI capability would also help alleviate the problems expected with EFT 99, the federal mandate that virtually every government payment be electronic by 1999.
Other proposals include broader adoption of an automated enrollment system developed by the Social Security Administration, a shorter processing cycle to allow for same-day credits, and "guaranteed funds" verification that would reduce risks in Internet and point of sale transactions involving the ACH.
Guaranteed funds "is a great idea," said George Thomas, senior vice president at the New York Clearing House Association. "It would make sure there were funds available before the release of goods."