In response to Kevin Wack's blockbuster two part series, which described how big banks killed a plan to speed money transfers and how the Federal Reserve might take charge of payments modernization, we received the following letter:
American Banker's two-part story on NACHA's Expedited Processing and Settlement (EPS) ballot (" How Big Banks Killed a Plan to Speed Up Money Transfers," Nov. 13; " Message to Banks: Speed Up Payments or Fed Will Take Charge," Nov. 15) missed the elephant in the room: NACHA and the industry want faster processing and are working to make it happen in a way that is a win-win for all participants and users of the ACH network.
The [automated clearing house] network has been in a state of constant change and growth over the past 40 years. What started as a system to enable payroll for the U.S. Air Force, today moves 80 million transactions per day. This growth and development are the result of the industry coming together collaboratively to serve the needs of consumers, governments, businesses and financial institutions that move their money via ACH.
Advancing the payments system through faster processing and settlement is a shared goal of the industry and part of current network evolution. However, as your article pointed out, the industry, including both large and small financial institutions, "registered a number of objections" to the EPS proposal as it was balloted.
Today, NACHA is working with the industry and other stakeholders to find a ubiquitous solution that achieves the right balance among all participants. Change is required by all if we are truly to create a solution to be valued by all, and NACHA is leading a process that engages the industry at large to drive toward a collective vision and objective.
This is the beauty of how private-sector rulemaking works. We engage, we advance, and we adapt to move the industry forward.
President and CEO, NACHA
The industry as a whole may want faster payment processing, but the biggest banks still appear to be in no hurry to make it happen. Wack reports today that The Clearing House, which represents the industry's Goliaths, has laid out a list of hurdles that would have to be met before it could support the Fed's modernization initiative. Among them:
The Clearing House paper argues that any industry-wide modernization plan needs to generate a reasonable return on the banks' investment spending not just in the long term, but also in the nearer term. "The business case needs to be staged to produce net benefits, as feasible, at each phase of deployment, instead of front-loading costs and back-loading benefits," the document states.
Some Fintech Twitterati were skeptical:
Brett King (@brettking) December 5, 2013
@MarcHochstein translation - we'll innovate if we have a guaranteed short-term return
Jason Marshall (@__JasonMarshall) December 5, 2013
Paul Kadin (@pkadin) December 5, 2013
How strong is the business case for same-day or real-time money transfers in the U.S. (which are already a reality in other countries)? Is the U.S. banking system capable of modernizing payments? How long would it reasonably take? Should the ACH network be modernized, or does an entirely new system need to be built? What are the short-term and long-term pros or cons associated with modernizing the U.S. payments system sooner rather than later? Share your thoughts by leaving a comment below. (Bankers can also submit comments to the Fed on these issues until Dec. 13.)
Marc Hochstein is the executive editor of American Banker. You can follow him on Twitter at @MarcHochstein.