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U.S. banks that send automated clearinghouse transactions are called "ODFIs." But in Europe, such companies are known as "debtor agents," and they do not even have to be banks.
A wonky banking detail, perhaps, but payments executives around the world will need to settle such linguistic differences and a host of other nitty-gritty technical issues if they hope to make a widely anticipated new ACH format into an important tool for international transactions.
The International ACH Transaction format is set to take effect next month, and bankers and regulators are hammering out the final touches on a rulebook to ensure payments executives in different countries are on the same page. The payoff, they hope, will be a new, inexpensive way for corporate customers to send funds across borders.
The format "lays the foundation for U.S. ACH to have a truly global face," says Elizabeth McQuerry, an assistant vice president in the Federal Reserve System's tain–it chose 100,000–and how many characters to put in the amount field–17, according to Jame Willis, a senior business executive at SWIFT, the global cooperative that handles international payments,. That could be a sign of just how much volume the group expects the International ACH Transaction format eventually will handle, though initially it "may be an issue if you're sending to Zimbabwe."
SWIFT (formally the Society for Worldwide Interbank Financial Telecommunication) is part of the forum and hosted the recent meeting at its New York offices. Forum backers see it becoming something of an international counterpart to NACHA, the electronic payments association that administers the ACH rules in the United States.
Timothy Schmidt, a vice president in global treasury management at U.S. Bancorp of Minneapolis, says the international ACH format could be used to deliver payroll for an overseas division of a company, or payments to expatriates who might receive funds by check now. "There's a big opportunity for ACH to capture some of that volume," he adds.
The format was developed mainly for nonurgent, smaller-value payments, and bankers do not expect it to replace wires, Schmidt says. "Right now, the predominant channel for processing international payments is wire transfer. We see that continuing."
Laying careful groundwork now will pay off later on, Schmidt says. "It's a huge technical advantage to have [the International Payments Framework] format," when banks want to establish electronic international payment systems to help their corporate customers send funds abroad, he says. "For a commercial bank, it represents the ability to streamline that process."
Dan Miner, a principal at the Chicago consulting firm Treasury Strategies Inc., says the international ACH format could become an important way to send funds abroad. International payments once were the province of the biggest banks, but "now you're seeing the second tier of banks aggressively going after" the market. "U.S. companies and banks will ultimately embrace international ACH." ATM
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