New Developments in Electronic Payments

1
New Developments in Electronic Payments

• Elliott C. McEntee
• President CEO, NACHA

2
ACH Facts 2005 (estimates)

• Volume 14.0 billion
• Value 30.0 trillion
• Number of Companies 4.8 million
• Consumer Participation 145 million

3
ACH Volume Growth

• Growth of selected ACH transactions (millions)
• 2005 Percent
  Increase
• Over 2004
• ARC 1,928 77.9
• WEB 1,185 40.6
• TEL 334
  27.6
• CCD 226 22.9
• CTX 49 20.5

4
ACH Market Share vs. Check
Types of Payments ACH Check ACH Market
Share Income 4.2 6.5 39.8 Consumer Bill
Pay 5.4 7.7 41.2 B2B 1.8 6.7 22.1 POS 0
.25 6.4 3.8 Includes POP and POS SEC
codes Comparing ACH POS market share with checks
and cards yields 0.06.
Source NACHA, Federal Reserve. ACH figures
include estimate of on-us.
5
Back Office Conversion
6
Current POP Experience

• Slow growth relative to other electronic payments
  
• Market penetration is low

7
Current Barriers

• Factors limiting POP growth
• Signature requirement
• Returning check at POS
• Increase tender time

8
Proposed Solution and Benefits

• Convert POS checks in a central back office
• Authorization through notice
• Consistent with ARC

9
Strategy for a Common Framework for Online
Financial Services

• Authentication - FI authenticates its own
  depositor at the request of a third-party
• Bill presentment FI presents a bill to its
  depositor at request of third-party via ACH
• Online payments FI authenticates its customer
  and guarantees payment to third-party

10
Demonstration

• https//www.accountstore.co.uk/ewpaydemo/dvd2/cart
  .jsp

11
Pilot Program for Online Payments

• Test online transactions for consumers
• Funds transfers
• Bill payments
• Purchases

12
Pilot Objectives

• Evaluate market demand and adoption
• Determine actual costs and net economic benefit
  to participants
• Evaluate fee structure

13
Pilot Participants

• Consumer/FI (Guaranteeing ODFI)
• Merchant/Biller/Government/FI (Sponsoring RDFI)
• Processor (eWise)
• NACHA

14
Bank Requirements

• Multi-factor authentication for online banking
• Resources to undertake development,
  implementation, support, and security with eWise
  support

15
Case for States to Participate

• Estimate 2.5 billion household payments (taxes,
  fees and fines) received in 2005
• Cost to receive check 2 to 4
• Problems with ACH debits
• Returns
• Cost of handling returns

16
State Requirements

• Sponsoring RDFI to participate
• Resources to work with eWise on website
  integration