AUSTIN, Texas — Wal-Mart Stores Inc. wants more say over how businesses use the automated clearinghouse network.
No strangers to confrontations with the payments industry, Wal-Mart managers said here on April 4 at NACHA’s Payments 2011 conference that banks have dragged their feet on potential rule changes that could benefit retailers and other corporations.
Jason Marshall, the senior director of payment services at the Bentonville, Ark.-based retailer, suggested that companies such as Wal-Mart should be given voting power over ACH rules set by NACHA, the electronic payments association.
“We believe that nonbanks should have the opportunity to be direct members, to have votes on operating rules and to be eligible for [NACHA] board membership,” Marshall said in an interview. During an earlier presentation, Marshall chided the group for being too focused on achieving industry consensus before pushing rule changes forward, which he said has slowed development of new payments products.
“If we expanded the way we govern NACHA, … we’d also be able to attack some of the industry’s resistance to change,” Marshall said during the presentation.
Corporations “have to have a more direct voice,” Marshall said. “After all, we’re paying for it all. There’s not a single investment that a bank’s making that’s not being paid for by a corporation.”
Wal-Mart has not had a “formal” discussion with NACHA leadership about its suggestions but wants to have more dialogue about the issue, Marshall said.
If Wal-Mart wants a more direct involvement in the organization’s rulemaking, it needs to make its voice heard, Mark Webster, a partner at consulting firm Treasury Alliance Group LLC, said in an April 4 interview.
“He’s got a good point that the corporates should have a say in the industry as a whole,” Webster said. “Whether it’s specifically being on the NACHA board, I think there are a variety of ways to get your voice heard.”
Wal-Mart is a member of NACHA councils on check electronification and electronic billing, Marshall said. Such groups do not carry voting power on ACH network rules.
Wal-Mart, the world’s largest retailer, has aggressively pushed for cheaper banking services over the years. It has battled with card networks and banks over interchange fees and stands to be one of the biggest beneficiaries of the pending regulatory caps on debit interchange that resulted from the Dodd-Frank Act.
It scrapped an application to charter an industrial loan company in 2007 amid industry opposition stemming from fear that Wal-Mart planned to get into branch banking. Today it is one of the biggest sellers of prepaid debit cards through a partnership with General Electric Co.’s GE Money and prepaid program manager Green Dot Corp.
Marshall’s presentation before a room of predominantly bankers and vendors was met with both agreement and skepticism from audience members.
Some asked what Wal-Mart would change about NACHA’s structure. Marshall did not give specifics but said businesses should be able to have a seat on the board to have more direct say over decisions that affect not only banks but also their customers.
The ability to vote on operating rule proposals is reserved for NACHA’s direct members, which only can be financial institutions. Regional payments associations, which represent financial institutions, are also allocated a certain number of votes based on their representation, said Mike Herd, NACHA managing director of ACH network rules.
Employees of direct members are able to serve on the board, which also has three positions reserved for members of NACHA’s various councils, a NACHA spokesperson said.
The councils are open to nonfinancial institutions and focus on specific industry issues.
NACHA executives said there are no proposals being considered that would give voting power over ACH rules to nonfinancial institutions or give nonfinancial institutions a seat on the group’s board.
Several years ago, NACHA’s board included a seat for a corporation but that position was phased out, according to George Thomas, a principal with Radix Consulting Corp. in Oakdale, N.Y.
Marcie Haitema, a former chairman of NACHA’s board who has worked for JPMorgan Chase & Co. and is now a private industry consultant, said board members must put industry agenda ahead of their individual agendas.
“As a NACHA board member, you have a fiduciary responsibility” to the organization and the industry as a whole,” Haitema said. “You cannot be there pushing what’s best for the bank.”
David Bellinger, director of payments for the Association for Financial Professionals, which represents corporations and is active in NACHA initiatives, agrees that businesses should have a direct involvement in rulemaking.
“We at least as corporates need to make it clear what corporates want ... as the folks that really do pay for the services that banks are providing,” Bellinger said.
NACHA solicits comments form industry stakeholders when considering rules changes, Bellinger said.
However, decision making at the board level would benefit from having nonfinancial institutions represented, Bellinger said.
Regarding ACH payments, a lack of consensus among banks has prevented the rollout of new services or have watered down ones that businesses want, such as a same-day ACH-settlement service, Marshall said.
In August, the Federal Reserve Banks, one of two ACH operators, introduced a same-day settlement service for its FedACH product. The service, based on existing ACH rules, has seen slow bank adoption because it is offered on an opt-in basis, is limited to a handful of ACH-transaction categories, and can only be used to conduct debits, not credits.
The Clearing House Payments Co. LLC, the other ACH operator, does not offer a same-day service.
NACHA is studying potential rule changes that would expand the timing of transaction-settlement capabilities on a broader scale.
“NACHA is taking steps to evaluate that offering and working with others to analyze possible ways that our shared infrastructure can support such changes,” Janet Estep, NACHA president and chief executive, said during the opening session on Monday.
It is “hard to imagine a future without settlement times changing” from what “they have been for the past 35 years,” Estep said.
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