Nearing retirement, Nacha’s Janet Estep has one vital task left

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Janet Estep is nearing the end of her tenure as Nacha’s CEO, but she's no less devoted to overcoming the last hurdles to implementing faster payments.

The path to faster payments has been a tug of war, and Nacha has been one of the technology's most outspoken proponents — even as its banks resisted getting on board with standardized same-day or near real-time processing.

It's a battle Estep has been winning in increments, from overcoming bank pushback to same-day settlement in 2012 to a push for open development and more flexibility in faster payments today.

“You can tell payments are kind of fun. I enjoy figuring out how they work and what they do,” said Estep, who joined Nacha in 2008 as president and COO before becoming CEO the same year. Estep will retire at the end of 2019 and will be succeeded by Jane Larimer, Nacha’s current COO and a 23-year Nacha employee.

The fight for faster payments
The Federal Reserve in 2015 approved same-day processing in line with Nacha’s ACH rule, which passed in early 2015. Progress soon followed, with Nacha reporting 178 million same-day transactions through its network in 2018, the first year of availability for credits and debits.

But there’s still work to do for same-day transactions, and the even faster version of real-time payments.

The expansion of P2P apps pressured banks to support and collaborate to manage settlement and other processing issues that result when transactions move faster, creating some of the same delays that marked the initial move to same-day payments earlier in the decade.

The Federal Reserve recently delayed Nacha’s request for a third processing window to obtain more public comment. Nacha hopes a third processing window will add more speed and flexibility.

Looking back
Estep spoke previously of the learning curve when joining Nacha, having spent time working at an environmental lab in the Twin Cities and in merchant acquiring. In a phone interview in May, Estep said the payments industry’s technology revolution and its impact on payment processing created opportunities for continuous learning ever since.

“Even though Nacha is a relatively small organization, we have conversations with many different types of organizations both in the U.S. and internationally. That is a part of the job I’ll miss the most,” Estep said

One of her more recent changes was tackling the use of open development tools and blockchain. Application programming interfaces, which feed open banking, enable banks to team with third parties to add more services — which impacts payment processing.

Nacha in early May released its Corporate Experience, which includes the Nacha Remittance Validator, Afinis standardized APIs and the Business Federated Directory, which uses a blockchain to support onboarding. The remittance validator allows buyers to validate the accuracy of payment remittance formatting for suppliers to enable easier straight through processing.

“It’s filling a gap in the industry. The new technology permits many companies to do things with APIs,” Estep said, noting the importance of standardization in building adoption and collaboration. “I called that out not because it’s different from other Nacha initiatives but to reemphasize that we need to adapt to the needs of the industry.”

Estep has long pushed for updates for payment processing, arguing that same-day ACH is a catalyst for faster transactions and there are global challenges to bring speed to processing. Projects that enable faster payments often advance at a different pace than customer or business-facing innovation — so the "Pays" or P2P apps or online payment services require speed to support their business models that can outpace faster payment standards in different countries.

There are also subtle differences in corporate posture. For example, Mastercard recently hired Liz Oakes to boost the card network’s faster payment strategy. Mastercard has also acquired Vocalink to support its push for faster payments. But Visa CEO Alfred Kelly has been less than bullish on real-time payments, suggesting at an investor conference that Visa may work on a real-time system that accommodates chargeback management. Kelly also said the myriad real-time payment apps, which could impact Visa’s debit card network, may not catch on.

Nacha's next steps
Amid the sea of activity, Nacha recently pushed the fourth edition of its Guide to Faster Payments, detailing the impact of the card networks and P-to-P apps such as Zelle, as well as providing information on how faster payments are executed and governed.

“There is still a need for education,” Estep said. “For banks in particular, they may want to determine their needs and the needs of their trading partners, and to find out of these partners are capable of supporting the types of payments that the bank wants to receive.”

Not all countries record and track transactions in the same way, which produces challenges in digitizing payments, according to Estep.

For example, the U.S. and Canada pass different amounts of information on ACH records, and this creates complications for businesses that wish to migrate beyond checks, Estep said.

Part of Estep’s work in her remaining time as Nacha will be to smooth out some of these differences.

“The ACH network has been around for decades. As payments change, the messaging layer changes. And as that information changes, that creates added obstacles,” Estep said. “If I have the capabilities and you don’t, it’s all for naught.”

The key to achieving buy-in is communicating that there are many solutions available — such as same-day ACH — but also a variety of other payment systems, Estep said, adding some are messaging layers that use existing payment rails, while others may operate outside existing rails.

“The rules themselves aren’t the only piece of the equation,” Estep said. “We have become involved in support tools that address the points of friction on the payment ecosystem.”

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