TO RETAIN VOLUME AND STAY RELEVANT, the Automated Clearing House (ACH) Network must integrate the best offer key technology and infrastructure advances evidenced in other payments networks, according to a new report from Javelin Strategy & Research. Same-day ACH, which goes into effect August 2, 2010, will be offered by just one of the two ACH operators, the Federal Reserve, as an opt-in program known as FedACH SameDay. A future rules change from NACHA – The Electronic Payments Association is recommended to mandate the service across all network participants, increase the profitability of same-day ACH, and strengthen the ACH network for the future.

“Advances in check imaging, wire transfer services, and mobile payments already are threatening the competitive positioning of the ACH network,” said James Van Dyke, president and founder, Javelin Strategy & Research. “There is a missed opportunity for ACH to meet the changing needs of consumers and to support evolving payment services needs, such as those required by mobile transactions.”

Among the findings of the Javelin report:

... For the FedACH service, same-day eligible standard entry class (SEC) codes composed 37% of all ACH transactions in 2009. Due to the opt-in nature of the current same-day ACH initiative and the participation of just one of the two Fed ACH operators, substantially less volume is likely to be converted to same-day.

... The market’s overall move toward accelerated transaction posting necessitated by capabilities such as mobile transacting, comprehensive risk management, and cross-channel integration, tangentially support the business case for same-day ACH.

... Developments in mobile payments offer a strategic incentive to payments networks such as the ACH, which needs to move more rapidly to achieve market position and recognition if it is to support mobile transacting.

... The value proposition of the ACH network can be clearly differentiated from that of other networks, such as wire transfer, regardless of advancements to sameâ??day services. Guidelines can be employed to delineate the appropriate use cases for each network.

... Proactive risk management by the ACH network is required to support a ubiquitous move to same-day ACH. The ACH network can advance its same-day readiness by supporting front-end evaluation of ACH transactions, leveraging aspects of ACH transaction configuration, and exploring real-time net settlement. 

“Changes brought about by recent regulatory actions indicate that banks will face ever-growing scrutiny of payments services,” said Beth Robertson, Director of Payments Research. “If lowerâ??cost options like sameâ??day ACH can be supported with rules modifications and selected advances in technology, banks should consider proactively supporting this evolution rather than waiting to be strongâ??armed into change by a government agency or by Congress. Today’s regulatory environment should encourage banks to focus on meeting the varying interests of their customers rather than on protecting existing businesses and revenue streams.”