An international group of bankers and payment executives is taking another step to promote the use of automated clearing house transactions across national boundaries.
The International Payments Framework Group said Monday that it would move forward with the second phase of a project to establish a legal and operational framework to convert ACH transactions between the United States and Europe into formats used in each place.
If all goes according to plan, the group expects transactions using the framework to be moving by the fourth quarter of next year, according to participants in the first phase of the project.
Alan Koenigsberg, a treasury executive of JPMorgan Chase & Co. in London, said that at its heart, the new framework would involve "a simple translation" between the ACH file formats used in the United States and Europe.
"We wanted to try to create as much of a 'business as usual' approach as we could, but with global reach," said Mr. Koenigsberg, who co-chaired the project's first phase, which involved more than a year of meetings among 30 banking companies, clearing houses, regulators, and technology vendors. "This would create in the world of low-value payments what we have had for a long time in the world of high-value correspondent banking."
Priscilla Holland, the senior director of network development at Nacha, the U.S. ACH rulemaker, said that in the first phase, participants were able to map the Nacha IAT category code to ISO 20022, an extensible markup language dialect already in use for transactions within the Single Euro Payments Area.
"IAT does map to the ISO format," she said. The next step is to coordinate Nacha's rules with the Sepa credit rulebook, and a group of 15 organizations is set to meet in Frankfurt next week to begin planning that phase.
Nacha is helping to facilitate the IPF effort, and the international group hopes to become the recognized rulemaker for international ACH payments.
Nacha's voting members approved the IAT code for international ACH transactions in August, to meet regulatory requirements to identify ACH originator and receivers. The rule is expected to take effect in March.
Mr. Koenigsberg described the euro-dollar transfers as "pilot currencies" for what is envisioned as a much broader, global ACH system.
"We could roll it out to other currencies over time," he said.
Benefits for banks include simplified back office operations, reduced operating expenses, certainty of service, and risk mitigation, Mr. Koenigsberg said.
Ms. Holland noted that participants in the first phase included financial companies not just in the United States and Europe, but also as far away as South Africa, Japan, and Brazil.
Today the Federal Reserve banks run the only U.S. network that officially does business with international payment codes, sending payments to Canada, Mexico, the United Kingdom, the Netherlands, Switzerland, Austria, and Germany, though banks also can send ACH transactions abroad using correspondent relationships.
Nacha's role is that of a facilitator and provider of "secretariat services," Ms. Holland said. "We really want this to be viewed as a global initiative."
Aaron McPherson, the research manager of payments at Financial Insights, the Framingham, Mass., research firm owned by International Data Group Inc., said that large U.S. ACH originators, such as JPMorgan Chase, the top originator here, could benefit from an international ACH system.
Because there probably will be only two or three pan-European systems, "you've got all of Europe to connect to," Mr. McPherson said. "The question is how fast will banks convert over to this new instruction."
