To the Editor:
The news that Citi is dropping its online person-to-person payment c2it ["
Makes you wonder. Personally, I think that the problem is on the consumer side of things. Consumers expect everything to be free, and the technology model may not match what they are used to doing. Also, it could just be that Citi couldn't figure out a way to make any money from it.
The problem with consumer acceptance is one reason that work by the Financial Services Technology Consortium - such as UVX (Universal Value eXchange), in which I am participating - has concentrated on business use, while not forgetting about consumers.
I don't think there's a problem getting businesses to use a new technology that makes their job easier and less expensive. Here I think the problem is the desire of banks to protect the traditional payment systems, and unfortunately that is a really difficult nut to crack. The largest banks get the most public visibility, not only through their advertising but in the press.
For example, there is an assumption in the industry that the extensions being made to the automated clearing house are the obvious solution to a variety of payment issues (and, I don't mean to pick on ACH itself, but it is the most obvious subject because it gets the most visibility). They believe this because that's all they see if they look in the industry trade journals.
It doesn't really matter if ACH is the right solution or not. It's going to be the solution because that's all people see. The big banks are also the biggest ACH operators, so they would love to see ACH volume grow. Whether that's the best solution for the banking industry as a whole seems to be kind of irrelevent, although I'd bet that they would believe that it is. For all I know, maybe ACH is the answer to all banking's payment needs, but wouldn't it be nice if we at least took a look at what else might be possible?
I continue to wonder what would happen if innovative work being done outside of the normal channels got the visibility that groups like Nacha get with things like check conversion and ARC (accounts receivable conversion). The fraud and operational issues with check conversion got a little press a few months back, but now that the the passage of Check 21 seems imminent, I know of exactly two people - and I'm one of them -who have asked the question, "Once Check 21 is enabled, why would anyone convert a check to an ACH item?"
I don't know the answer, but it seems like an interesting question. With Check 21 in place, do you really need ACH? Once again, I don't know the answer - I'm just asking the question.
The implications of Check 21, beyond its stated purpose, would seem to promote all sorts of opportunities, using technologies that have been in existence for some time. That was what we tried to do in the UVX project at FSTC. As you might have expected, we ended up with a small group of small companies doing the work - not the kind of thing that will get a lot of coverage, although I have had some nice comments from folks at the TowerGroup. The lack of resources hindered our ability to get a lot done, but I think we'll still bring up some interesting questions when the final report is published at the end of October.
From that standpoint, I think we will have done valuable work, regardless of how people accept it or rip it to shreds. At least they'll have to take a moment to think about it. In these difficult economic times, it's difficult to get anyone to invest in this kind of work, and that's understandable. But the payments franchise is really all banks have to hold on to - though the way they're approaching it, I wonder if it's kinda like protecting a monopoly on blacksmithing.
