Posted by Mark Brousseau
NACHA's proposed rule change for mobile payments provides a wake-up call for banks and billers unconvinced of the need for an Enterprise Payments Hub. Leilani Doyle (ldoyle@usdataworks.com) of US Dataworks (www.usdataworks.com) explains:
A proposed NACHA rule change for mobile payments is another nudge for banks and billers that have been reluctant to deal with the stark realities of the increasingly diverse payments environment.
The proposed rule change would expand the definition of Internet-Initiated Entries (WEB) to include ACH debits authorized and/or initiated via mobile/wireless networks, and require that those payments utilize the WEB Standard Entry Class (SEC) code. The rule change would cover payments made with a mobile device such as a smart phone, cell phone, and/or PDA, where the payment is transmitted via a wireless network. NACHA just concluded a request for comments on the change.
Expanding the WEB SEC code to include mobile payments is a reasonable idea.
NACHA says the rule change would clarify the entry classification for mobile payments over the ACH Network, and provide a framework for risk management and security, including authentication and authorization. While current NACHA rules don't specifically address mobile payments, many companies are either originating these payments over the ACH Network, or planning to in the future.
The NACHA proposal comes at a time when mobile payments are poised to grow. Insight Research Corporation estimates that 2.2 billion consumers will generate $124 billion in mobile financial transactions by 2014. More conservatively, Mercator Advisory Group estimates that payments from remote devices will grow from an estimated $389 million in 2009 to $8.9 billion in 2014.
A Better Solution
Regardless of how fast you believe mobile payments will grow, the NACHA rule change for mobile payments shines a bright light on a subject that is vexing many banks and billers: how to deal with yet another distinct delivery channel for payments with its own unique characteristics. Banks and billers must balance the need to mitigate the risks of each payment channel with the desire to remain flexible and avoid creating new silos, which, in turn, stifle agility and customer responsiveness.
To be sure, as mobile payments volumes rise, the channel will bring its own set of systems and process challenges, and be subject to fraud and attack -- regardless of the NACHA rule change.
That's true of all of the emerging payment channels.
The solution lies in utilizing an Enterprise Payments Hub to provide a single platform for processing all paper-based and electronic payments (including mobile), regardless of clearing channels.
An Enterprise Payments Hub provides a consolidated, end-to-end transaction processing platform that offers integration with legacy payments and receivables systems and processes. Management of all payment channels, including lockbox, mobile/wireless, Web bill payments, and over-the-counter work, is controlled through a single enterprise platform. An Enterprise Payments Hub is capable of managing the entire payments lifecycle including payments processing, check processing, retail processing, payments decisioning, and returns management. Incoming payments are cleared using Check 21 and ARC conversion for conventional remittance or lockbox processing, while other forms of bill payment and retail work is processed using the appropriate NACHA SEC code ( i.e. ARC, POP, RCK, TEL, WEB, PPD, CCD and BOC). Credit card and debit card payments are also processed through the platform for a fully integrated accounts receivable (AR) process.
An Enterprise Payments Hub is especially effective when the multiple payments channels of an organization are centralized, as standalone systems and processes can be significantly reduced. For example, an Enterprise Payments Hub can enhance workflow and data management, and facilitate common processes and administration across all payment channels. This functionality eliminates manual processes, accelerates exceptions handling, increases corporate agility, and improves float.
These capabilities also provide a platform for straight-through-processing (STP).
The Bottom Line
While the United States lags behind many industrialized countries in the adoption of mobile payments, there is no question that banks and billers need to be prepared for the channel's inevitable growth. The sooner organizations can develop a framework for mobile payments usage and risk, the better positioned they will be when the channel explodes. NACHA should be applauded for providing some level of regulatory guidance on payments that originate from mobile devices.
But the proposed NACHA rule change is only one piece of the emerging puzzle.
To optimize their payments processing and risk management, banks and billers must bring all of their payments channels -- including mobile/wireless -- together in an Enterprise Payments Hub.
What do you think? Post your comments below.
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