NACHA and FIS sat down with bobsguide to discuss the rising need to modernise the Automated Clearing House (ACH) network in a webinar hosted on June 28.
“In 2017, ACH processed more than $46.8 trillion from 21 billion electronic financial transactions, double the GDP of the US,” said Amy Morris, director at NACHA. “ACH is clearly vital for the US economy.”
ACH has grown in popularity in recent years, and shows no signs of stopping that expansion despite the rise of real-time and faster payments in the US.
“We’ve had tremendous growth year on year, almost a full 6% increase on this quarter the year before,” said Morris “Direct deposit or consumer credit which is the bread and butter function of the ACH network still continues to increase at over 4%.”
For Morris the ACH system is evidently worth maintaining though she does recognise the challenges of modernising the system: “In other countries there’s been a convergence of payment systems though given the volume in the US that’s impractical. The number of US financial institutions – some 11,000 – makes the US market particularly unique and a ship that’s difficult to steer.”
Despite these challenges, some 64.5% of those polled during the webinar indicated that their customers were very satisfied with their ACH processing.
“I’m not surprised by these results,” said Laura Parsons at FIS. “With a mature system like ACH there are a lot of uses around ACH, particularly batch processing and a lot are making non interest income on it so there’s a high level of expectation and expectation around innovation. At the end of the day, we all understand it’s a trusted network moving trillions of dollars accurately.”
That expectation around the innovation and making ACH more cost effective was a high priority with 67.6% of the webinar audience indicating their financial institutions had plans to modernise their ACH system.
So, what’s holding banks back?
“Trillions of dollars,” said Parsons, “but joking aside, the processing system is usually an operational back end office. Let’s be honest, it’s hard for that to compete against the strategic dollars that consumer facing, front end offices are given towards innovation.”
Parsons believes a more holistic and organizational view is required as many of those front end offices are dependant on and interact with those back end functions.
Laura Sullivan, also of FIS, agreed, explaining that there are great examples of new entrants providing more than the basic function of ACH to improve services “PayPal and Zelle both do their transactions on ACH. Consumers don’t care how transactions are happening, they just want to know it works accurately.”