For the most part, big banks and trade groups have run the conversation on deploying a faster payment system in the U.S. But Nacha's recently proposed 8.2-cent fee for same-day Automated Clearing House payments has merchants taking notice.
Merchants would like to see banks compete for pricing on a faster ACH system, rather than rely on another association to establish pricing for them, said the Merchant Advisory Group, a trade association with membership representing 90 major U.S. merchants.
MAG fears the interbank fee will "ultimately be borne by the end users, typically merchants." The group doesn't want Nacha to have the authority to set pricing. "They have no more authority to set a price like that on behalf of a bunch of banks, than we have to set a price on behalf of merchants," said Mark Horwedel, CEO of Merchant Advisory Group.
Nacha is the Washington-based trade group that sets the rules for the ACH network. In December of 2014, Nacha offered its proposal for same-day payments, making funds available to consumers by the end of a business day rather than the current status quo of depositing funds a day later.
Nacha suggests a flat fee of 8.2 cents per transaction, to be paid by the originating banks to the receiving financial institutions, to help recover costs related to technology upgrades.
Nacha CEO Janet Estep acknowledged it is a vital balancing act for her association to address the competing interests of the various stakeholders in creating a faster payments process.
"Nacha's request-for-comment process ensures we hear from all ACH network participants consumer advocates, corporate treasury users, payroll professionals, government agencies, retailers, and all types and sizes of financial institutions," Estep said in an e-mailed statement.
Retail point of sale ACH transactions make up less than 1% of ACH network volume, Estep said, but other changes to the network over the years such as check conversion "have greatly supported retailers in how they are able to efficiently use the network."
Nacha will continue to "work diligently to listen to and understand all participants views," she added.
MAG felt compelled to send a letter to Nacha in late February in response to the electronic payment association's request for feedback on its latest proposal.
"Nacha and the bankers have been looking for an excuse to charge for ACH for a long time, and it appears the Fed initiative for faster payments in the U.S. is providing them with the opportunity to do that," Horwedel said. "That's really the thing that tripped us."
MAG also wants Nacha to consider eliminating the fee or lowering it while expanding the proposal to cover credit ACH transactions for point of sale payments, instead of just debit ACH.
Banks would be mandated to upgrade their systems so they could receive same-day payments, under Nacha's proposal, which also contains an automatic method for adjusting the interbank fee based on the volume of transactions. As the number of same-day transactions increases, the interbank fee would decrease. MAG prefers real-time payments as opposed to batch processing.
MAG's concerns highlight what has essentially been an ongoing war between banks and retailers, said Richard Mader, president of Mader International Consulting. Mader serves as executive director of the Association for Retail Technology Standards, a division of the National Retail Federation Inc.
"Maybe this is the first round of negotiations for the merchants, hoping they could get the fee down to 6 cents or so," Mader said. "I actually thought the retailers would be applauding that Nacha has done this, to take advantage of an 8-cent transaction."
But the 8 cents is a significant change from the benefit the banking community enjoys from the Fed's low-price switching system established in the past. The Treasury migrated all payments, including Social Security, away from paper and into ACH, at a cost of one-quarter of a cent per transaction, Horwedel said.
"I can see [merchants] always seeking a lower price and saying it should be less, but there is no such thing as a free lunch," said Larry Berlin, vice president with Chicago-based First Analysis Securities.
The Nacha proposal was expected, considering the role it has to play in the Federal Reserve System's overall goal of establishing a faster payments system and keeping pace with other global systems.
"If you ask government to be involved [in faster payments], this is kind of what you get," Berlin said. However, Nacha has minimal government involvement and it hasn't been invasive while providing a "useful service in the bill payment spaces," he added.
With its faster payment proposal, "the fees are not particularly big, and would provide a lot more competition to Visa, MasterCard and the card associations, at a lower price than interchange," Berlin said.
Big banks have balked at Nacha proposals in the past that call for banks to offset costs, and the Federal Reserve Board was quick to raise concerns about the latest concept calling for a per-transaction fee.
The Nacha proposal to get ACH on a faster track is considered by many to be an important first step in an overall faster payments process that could last as along as a decade, based on Federal Reserve estimates.
In late January, the Federal Reserve System unveiled its vision for faster payments in the U.S., the latest step in an ongoing process to get all stakeholders moving in the same direction to establish the improvements.
The report lays out four options for building a faster payment system: Evolving the existing PIN debit infrastructure, which is currently used in retail stores and at ATMs, to enable real-time payments; using common protocols and standards to facilitate the clearing of transactions over the Internet; building a new payments infrastructure that would build on existing technology and only have limited uses; or building a new payments infrastructure that would process a wider range of transactions.
The report states that the four options will be studied further. The Fed released details March 16 for participation in two task forces the faster payments task force and the secure payments task force to continue studying the options to advance the initiative.