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Is the ACH the Best Path to Faster Payments?

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19 March 2014

Comments

  • I think the current system is fine, however, more companies should adopt the ACH as a payment method. It is less expensive, and returns are received faster. Seems like a no-brainer to me!

  • An interesting survey response and one which, unless complemented by another suite of questions (perhaps entitled "When I receive payments, I expect") is incomplete. For example turn the 4th question around and it becomes "when I receive money I expect to be able to use it immediately" which would probably incur a higher response rate (especially amongst small businesses), as would an addition to the original list "when I make a payment I expect my obligations to be cleared immediately" (a very popular guarantee with UK citizens paying their monthly credit card bill on the final due date in real-time and avoiding interest charges).
    The subject of this article seems to focus primarily on the Person to Business Use Case (typically a card payment) which is primarily asymmetrical – but this is only one use case. ACH payments are about peer to peer, symmetrical payments. As such they are a vital underpinning to payments across all use cases except that of systemically significant payments, where transfers across the books of the relevant central bank are the appropriate form. The ACH should at its core be capable of supporting the highest service level that may be required of it- immediate payment on a continuous clearing model (note not RTGS). Certainly, where required to meet legacy demands it can then be "de-tuned" to emulate a legacy batch transfer and settlement process. Unfortunately this doesn't work the other way. Speeding up batched payments, whilst commendable from many angles, simply does not have the transformative punch of a real-time retail service. In this way I agree that the current batch ACH may not be the right rails for the future – but the fundamental role of the ACH, (a general purpose payments infrastructure) re-invented in real-time mode will be the right rails to support the raft of future, faster payments needs.

  • […] what ‘real-time’ really means and what is the best way to achieve it, as indicated by Bob Meara’s blog about the same-day ACH initiative. At the conference the Fed representatives shared the results of the public consultation on […]

  • […] recently posted some views on the same day ACH – as always, great points, well made. Somehow, in Twittersphere, some of the comments got […]

  • I agree, Eric! For some companies, however, moving to ACH on the receivables side, unless accompanied by EBPP creates more cost on the cash application side than is saved (by the payor), so they persist wanting to be paid by check. Change here, unfortunately, is slow.

  • Thanks for weighing in, Nick! I agree with you about the survey - one data point is not conclusive. We're clearly behind the UK here and perhaps consumer attitudes remain forgiving (for now).