The US should take a bold step forward and forget about patching up the old, creaking ACH infrastructure. Build something for the 21st century!
Tim Sloane from Mercator wrote a super piece on how the US ACH infrastructure isn’t quite up to the job of providing the real-time funds transfer infrastructure needed for a 21st-century economy.
in the best possible scenario they are more or less correct; funds will appear in the consumer’s prepaid account on some random day in the future
Here in the UK, the picture is different. The new ACH, the Faster Payments Service (FPS), is working splendidly well and is already spawning new payment products (e.g., Barclays PingIt, Zapp and Paym). It’s not perfect (it would be nice to have messaging with more and structured content, for example), but it’s pretty good. Surely it can’t be that complicated for the top 10 banks in the US just to build something similar — but better, with messaging and APIs — and then open it up on the same basis as FPS: free to retail customers.
Per my blog yesterday, ACH debit tokens can work, particularly if the consumer doesn’t have to enter them. Also in ACH, banks are in a position to influence acceptance.
Following the Federal Reserve’s consultation process, NACHA has indeed said that it will look at delivering a more modern infrastructure for the US, but I still think (as we said in our response to the Federal Reserve consultation) that tinkering with the disco-era systems in place isn’t the best solution for the US.
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.
Indeed. So why bother? Leaving the existing network alone and build a new Faster Payment Service (FPS) on cheaper modern technology, using 20022 XML, and go push-only. Let the old ACH, and its pull services, wither away.