Information, Please!

Posted by Mark Brousseau

After years of discussion, plans to expand the Automated Clearing House (ACH) Network to facilitate the electronic transfer of supplemental remittance information may finally gain traction.

Initiatives to use the ACH rails to transfer information associated with business-to-business payments and healthcare payments were among the hottest topics at WesPay's Payments Symposium this week at the Renaissance Hotel in Long Beach, California, notes Leilani Doyle (ldoyle@usdataworks.com), product manager at US Dataworks (www.usdataworks.com), a Houston-based solutions provider.

"The ACH Network has proven to be a stable and successful payments channel," Doyle explains. "But as electronic transactions continue to gain acceptance, it is clear that the ACH Network needs to be expanded to more efficiently carry remittance information, as well as payment instructions."

Doyle notes that several initiatives already are underway to allow information to be passed along with payment instructions. The most notable effort is the new International ACH Transaction (IAT) format. "It was necessary for OFAC [Office of Foreign Assets Control] reporting that international payments include enough information with ACH transactions for proper screening. To accomplish this, addenda records were added to accommodate the required information," Doyle explains.

Now, NACHA is extending this concept to business-to-business payments, hoping to eliminate one of the largest remaining obstacles in electronifying business checks: the need to communicate remittance information. "This is not a new concept," Doyle says. "NACHA's CTX [Corporate Trade Exchange] format was a start. But the ANSI standards it relies on are too complex to be effectively used by mid-sized businesses." As an alternative, a plan is under consideration to combine standardized addenda records with XML tags that could be interpreted by both sending and receiving ACH systems. "This approach may be a real solution to the B2B ACH trade payments problem."

Another big opportunity for an expanded ACH Network lies in the healthcare space. "Imagine an ACH standard record format that allows EOB [explanation of benefits] information to be linked from within the payment," Doyle says. "Using this approach, there would be no need to send all of the EOB information around on the ACH rails. Instead, an addenda record would provide secure and specific access to EOB information in an XML format," Doyle explains, adding that this "simple and extensible" solution is designed with the healthcare market's fast-changing requirements in mind.

NACHA is hardly standing still as it puts the finishing touches on its information initiatives. The organization introduced Secure Vault, a payment system that allows consumers to pay for goods and services over the Internet, without disclosing their bank account information. "The Secure Vault payment method connects directly to a bank's online banking application where the customer enters their ID and password, and money is then transferred to the merchant using the ACH Network," Doyle says. After a lengthy pilot, Secure Vault is now "ready for primetime," Doyle says. "The Secure Vault concept is sound, but only time will tell whether the adoption rate is high enough for it to become as ubiquitous as credit card and e-check payments for Internet transactions," Doyle adds.

What do you think?