Some of the nation's biggest banks killed a proposal in 2012 that would have enabled electronic payments to be processed on the same day they're initiated. Now the industry group that championed that plan, Nacha, is reviving its effort to speed up payments across the network that connects every U.S. bank and credit union.
Nacha announced today that its new goal is to phase in same-day capabilities in three stages, rather than all at once. The group hopes to hold a vote on a specific proposal, perhaps about a year from now, after listening to comments from banks, credit unions and users of the payments system.
"We do want to seek feedback," said Janet Estep, Nacha's president, "because certainly implementing across some 13,000 financial institutions across the United States is not a simple task."
Estep demurred when asked how soon the speedier payments system might be fully built. "At this point, it probably is most prudent to say that we do not have any firm timeline because we are seeking input," she said in an interview.
The step-by-step approach could give banks more time to make costly upgrades to their computer systems. The expense of making technology improvements is widely seen as a key reason that some banks opposed the 2012 proposal to modernize the automated clearing house network.
Under the three-phase approach, banks would first make improvements to enable their customers to push money into other accounts without enduring waits of a day or more. Examples of this type of service include the direct deposit of paychecks by employers and person-to-person payments.
The second phase would allow bank customers to pull money from other accounts on the same day the request is made. This type of payment is often used to allow automatic bill payments to be deducted from consumers' checking accounts each month.
In the final implementation phase, banks would enable their customers to make same-day payments twice each weekday. This move is designed to help banks, businesses and consumers located in the Pacific time zone. Under the earlier proposal, West Coast banks would have needed to submit their transactions by 11 a.m. Pacific time to squeeze into the same-day window.
Processing payments twice each weekday would mark a significant step forward for the U.S. banking system, though it still falls well short of the near real-time systems that have been built in the United Kingdom, Mexico, Sweden and other countries.
"So it does infuse the concept of more continual processing," Estep said. "It certainly isn't continuous settlement."
Nacha said that it's launching a study to assess how much it would cost banks to implement the proposed improvements, as well as the potential volume of payments that would move across an upgraded system.
Nacha's membership includes many of the nation's largest banks, in addition to more than a dozen regional payment associations that represent the views of financial institutions in specific geographic areas. Only Nacha members get to vote on the group's proposals, but the organization also solicits feedback from users of the payment system.
Today's announcement follows the publication of a paper last fall by the nation's Federal Reserve banks, which envisioned the construction of a near real-time payment system linking every U.S. bank and credit union by 2023.
In February, after soliciting public comments on its 10-year vision, the Fed signaled that it is pushing ahead with its efforts to encourage the construction of a speedier electronic payment system.
Estep said today that she sees the Fed's efforts as complementary to Nacha's new initiative. She explained that the kinds of improvements envisioned by Nacha would provide a foundation on which banks would be able to build other products, such as real-time payment capabilities.