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NACHA Online Payment Initiatives: Joint Payment Center Conference. Rob Unger, AAP Sr. Director Network Services NACHA 703-561-3913, runger@nacha.org. Agenda. NACHA/ACH Overview EBIDS (Electronic Billing and Information Delivery Service) Secure Vault Payments

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nacha online payment initiatives joint payment center conference

NACHA Online Payment Initiatives: Joint Payment Center Conference

Rob Unger, AAP

Sr. Director Network Services

NACHA

703-561-3913, runger@nacha.org

agenda
Agenda
  • NACHA/ACH Overview
  • EBIDS (Electronic Billing and Information Delivery Service)
  • Secure Vault Payments
  • Exception Processing Mitigation

(c) NACHA

introduction to nacha
Introduction to NACHA
  • Not for profit association
  • Two primary functions
    • Establishes operating rules for Automated Clearing House Network
    • Trade association to promote electronic payments

(c) NACHA

what is the ach network
What is the ACH Network?
  • “ACH” stands for Automated Clearing House.
  • The ACH Network is an electronic banking system:
    • Batch processing, store and forward
    • Transactions are stored during the day and sent to the network in batches, usually in the afternoon and/or evening
    • Transactions are not real-time or online.
  • The ACH Network processes both credits and debits.

(c) NACHA

scope of ach rules
Scope of ACH Rules
  • 18,000 Financial Institutions
  • 6 million companies
  • 145 million consumers
  • 16 billion transactions in 2006
  • 33 trillion dollars in 2006
    • Direct Deposit
    • Direct Payment
    • Corporate payments
    • And more

(c) NACHA

ach volume growth
ACH Volume Growth

Growth of selected ACH transactions update

20052006 Increase

Total ACH 13,957 15,984 14.5%

POP 224 356 59.0%

Avg $ 79

WEB 1,343 1,807 34.5%

Avg $ 385

ARC 2,154 2,839 31.8%

Avg $ 290

TEL 319 388 21.5%

Avg $ 403

(c) NACHA

agenda7
Agenda
  • NACHA/ACH Overview
  • EBIDS (Electronic Billing and Information Delivery Service)
  • Secure Vault Payments
  • Exception Processing Mitigation

(c) NACHA

slide8

EBIDS Discussion

  • EBIDS Concept
  • Processes
    • Biller Enrollment
    • Consumer Enrollment
    • Bill Presentment
    • Bill Payment
  • Benefits
  • Pilot Status

(c) NACHA

electronic billing and payment needs
Electronic Billing and Payment Needs
  • Despite significant gains, overall EBPP adoption still low compared to entire possible volume
  • Current state bill presentment/delivery
    • Unique customization requirements for bill
    • Proprietary channels are the only option for bill delivery
    • Greater adoption requires interoperable, secure method for bill distribution
  • Current state bill payment
    • Check payments still generated from online banking because banks don’t know how to send electronic payments to all billers
    • Lack of data/incorrect data from online banking systems increases exception processing
  • Bill payment is a costly “free” service for banks to provide

(c) NACHA

the ebids breakthrough
The EBIDS Breakthrough
  • Bill delivery: The ACH is an interoperable, rules-based, secure network that can provide a ubiquitous bill delivery/payment channel to thousands of FIs and millions of businesses
  • Bill payment: The ACH credit model is a low-risk, low-cost option that eliminates non-electronic payments and user-based exceptions from online banking when coupled with bill presentment.
  • New revenue paradigm: EBIDS proposes a business model for banks to be compensated for enrolling consumers and presenting consumers’ bills, and provides a least cost routing option for payment.
  • Pilot sponsored by NACHA’s Council for Electronic Billing and Payment

(c) NACHA

electronic billing information delivery service ebids
Electronic Billing Information Delivery Service (EBIDS)
  • Consumer enrolls for ebill via Internet banking with consumer’s bank
  • Biller (via a bank) sends summary billing information/remittance data in an ACH addenda record with a URL to provide access to bill detail
  • ACH network serves as ‘switch’ and delivers summary bill information to consumer’s bank
  • Consumer’s bank provides billing information to consumer via Internet banking system
  • Consumer authorizes credit payment, transacted through normal ACH processes with remittance data

(c) NACHA

ebids summary process flow
EBIDS Summary Process Flow
  • Enrollment
  • Consumer enrolls through CFI to receive summary bills from Billers via ACH using ENR

2. Acknowledgement

Billers need to acknowledge EBIDS enrollment requests. Biller confirms/rejects an enrollment using the ENR entry

ACH Operator

Biller Financial Institution (BFI)

Consumer Financial Institution (CFI)

1

2

3

3. Bill Presentment

Biller to route the consumer’s next bill to the CFI using a zero-dollar CTX transaction, with the summary bill info embedded in an addenda record

4

Consumer

Biller

  • 4. Bill Payment
  • Consumers will connect to CFI system to view summary bills and authorize payment to Biller

(c) NACHA

slide13

Biller Enrollment

  • Allows for data capture, storage and retrieval of biller and bank information.
  • Supports consumer banks’ need to know which billers are participating
  • Supports consumer enrollment and delivery of electronic payments with remittance data
  • Support delivery of epayments without e-bills
  • Ensure e-payment and remittance data go to most current and correct electronic lockbox
  • A web-based application

(c) NACHA

slide15

Consumer FIs

download

biller directory

data via XML file,

add biller to their

billpay system

consumer enrollment
Consumer Enrollment

Automated Enrollment Entry (ENR) via the ACH

2. Consumer Financial Institution (CFI) initiates ENR for each biller and transmits entries to ACH Operator

3. ACH Operator routes ENR to appropriate BFI

Consumer Financial Institution (CFI)

Biller Financial Institution (BFI)

ACH Operator

4. BFI delivers ENR to biller – biller enrolls consumer

1. Consumer enrolls through CFI providing the required enrollment info

MAINTENANCE

Consumers may deactivate their EBIDS enrollment through the same process flow through the CFI

Consumer

Biller

(c) NACHA

enrollment acknowledgement
Enrollment Acknowledgement

ENR Enrollment Confirmation

3. ACH Operator routes ENR to CFI, CFI updates bill presentment data system with enrollment status

2. BFI transmits ENR to ACH Operator for delivery to CFI

Consumer Financial Institution (CFI)

Biller Financial Institution (BFI)

ACH Operator

1. After accepting ENR, Biller transmits acknowledgement to BFI to confirm receipt and acceptance (or rejection)

4. Consumer connects to CFI system to view enrollment status

Consumer

Biller

(c) NACHA

bill presentment
Bill Presentment

Zero-Dollar CTX Bill Presentment

3. ACH Operator routes CTX to CFI, CFI updates bill presentment data system with new bill

2. BFI transmits CTX to ACH Operator for delivery to the CFI

Consumer Financial Institution (CFI)

Biller Financial Institution (BFI)

ACH Operator

1. After receiving ENR and enrolling consumer, Biller transmits zero-dollar CTX with bill summary data embedded in an addenda record

4. Consumer logs on to CFI to view bill

Consumer

Biller

(c) NACHA

slide25

Click here

to see ebill

(c) NACHA

slide26

Bill detail

from Verizon site

no sign-in required

(c) NACHA

accessing full bill detail saml server strategic assertion markup language
Accessing Full Bill Detail: SAML Server (Strategic Assertion Markup Language)
  • Consumer clicks to “view bill” on the consumer FI site then receives bill detail from the biller site
  • SAML is a message protocol for passing the consumer FI credential to the biller, without requiring the consumer to log-in with the biller
  • Accomplished through the exchange of assertions and seamless to the consumer
  • Result: a ‘single sign on’

(c) NACHA

ctx corporate trade exchange for bill summary sent by biller to consumer fi sample 7 record
CTX (Corporate Trade Exchange) for Bill Summary Sent by Biller to Consumer FI – Sample “7” Record

CTX ADDENDA RECORD for EACH CONSUMER

(c) NACHA

bill payment
Bill Payment

CIE Bill Payment

2. CFI sends CIE to biller via the ACH Operator

3. ACH Operator routes CIE to appropriate BFI, BFI credits Biller account

Consumer Financial Institution (CFI)

Biller Financial Institution (BFI)

ACH Operator

4. BFI routes Biller remittance identifier data to Biller; Biller credits consumer account

1. Consumer authorizes payment to Biller after viewing summary bill on CFI system

Consumer

Biller

(c) NACHA

cie consumer initiated entry sent by consumer fi to biller sample 6 record
CIE (Consumer Initiated Entry) Sent by Consumer FI to Biller – Sample “6” Record

ENTRY DETAIL RECORD (CIE)

(c) NACHA

biller benefits
Biller Benefits
  • Meets preference for multiple channels
  • Increased adoption
  • Reduces unapplied payments
  • Guaranteed funds
  • No administrative returns
  • Accelerated posting of payment
  • Cost reduction
  • Improved customer experience

(c) NACHA

fi benefits
FI Benefits
  • Supports online banking: lowers attrition, higher account balances, increases cross-sell, lower service costs
  • EBIDS leverages ACH Network for enrollment, presentment, and payment
    • Lowest cost channel and best potential reach
    • Uses industry standards – NACHA rules
    • Non-proprietary
  • Provides compensation to consumer’s financial institution – new revenue stream
  • Enables a more direct working relationship between biller and banks for EBPP
  • New revenue opportunity for bill delivery/remittance services

(c) NACHA

consumer benefits
Consumer Benefits
  • Privacy of information – financial account information remains with financial institution
  • Remains in control of account and timing of payment
  • Access to more bills, bills are consolidated at one site
  • Access to bill detail through single sign on

(c) NACHA

pilot status
Pilot Status
  • EBIDS Product Design complete
    • Processes, rules, and data formats for consumer enrollment, presentment and payment
  • Biller Directory complete
  • SAML Server – in final testing phase
  • Pilot revenue model complete
  • Participant system update and integration - ongoing
  • Target date for launching transactions: 3rd quarter 2007
  • NEED MORE BILLERS!

(c) NACHA

agenda37
Agenda
  • NACHA/ACH Overview
  • EBIDS (Electronic Billing and Information Delivery Service)
  • Secure Vault Payments
  • Exception Processing Mitigation

(c) NACHA

market drivers
Market Drivers
  • Rapid growth of Internet commerce has led to industry challenges.
  • Security and privacy concerns
    • 50% of US Internet users avoid making purchases online, afraid financial information may be stolen(CyberSecurity Alliance Research 5/06)
    • Nearly half of consumers avoid online Bill Pay due to security concerns(comScore Networks, cited in American Banker 4/20/06)
    • Alternative online payments will account for 26% of eCommerce volume by 2009(Celent, 5/06)
  • Continued fraud and chargebacks
    • 35% of online orders are flagged for manual review related to fraud detection (CyberSource Corp., cited in Digital Transactions 6/13/06)
    • 6% of good sales lost due to fraud/risk screening(Cardline 2005)
    • Fraud is the top reason given for chargebacks on several networks(American Banker interviews with network executives, 1/17/06)

(c) NACHA

market drivers cont
Market Drivers Cont.
  • Businesses want payment options
    • 72% of consumers surveyed say the have abandoned an online purchase
    • 74% of consumers willing to spend $960 more per year (Javelin Strategy and Research, 7/06)
    • 24% of consumers report shopping less online (Visa news release, 1/06)
  • Open new markets
    • Digital content – music, games, subscriptions, video
    • Last-minute/expedited payments
  • Online account opening
    • Bank reliance on non-bank providers – CashEdge,Yodlee
  • Guaranteed & authenticated payment options for billers
    • Card issuers
    • Mortgage and loan payments
    • Bank-centric substitute for biller-direct

(c) NACHA

the private secure bank authenticated payments solution
The Private, Secure, Bank-Authenticated Payments Solution
  • ‘Secure Vault’ simply refers to using online banking to initiate Internet payments
  • Consumers keep financial information private – never disclosed to the seller
  • Seller receives real-time authorization of guaranteed payment (ACH Credit)
  • Financial Institution authenticates the buyer, reducing risk, fraud, and charge backs
  • Relieves seller burden to secure/protect consumer financial information

(c) NACHA

demos
Demos
  • Consumer Purchases
  • Bill Payments
  • Funds Transfers

(c) NACHA

key features
Key Features
  • Bank customers keep financial information private – never disclosed to businesses
  • Bank leverages existing online banking platform and connections to payment networks
  • Bank receives interchange revenue for authenticating existing customer and guaranteeing payment
  • Bank is central to its customers’ transactions

(c) NACHA

stakeholder benefits businesses
Stakeholder Benefits – Businesses
  • Real-time authorization of a guaranteed payment (ACH Credit)
  • Sales lift – new customers, higher tickets, more purchases, less shopping cart abandonment
  • FI Authentication - reduces risk, fraud and charge backs
  • Eliminate need to secure/protect customers’ financial data

(c) NACHA

stakeholder benefit fis
Stakeholder Benefit - FIs
  • Use existing infrastructure - costs to support this channel have increased in the areas of authentication and security (FFIEC Guidance)
  • Create new potential revenue stream - FIs generate little direct revenue from the online banking channel today
  • Leverage customer relationships
  • Grow the eCommerce ‘pie’ and enable new online transactions
  • Take a leadership role in privacy

(c) NACHA

stakeholder benefits consumers
Stakeholder Benefits – Consumers
  • Security and privacy – no financial information shared with the seller
  • Familiar user interface with online banking
  • More payment control and flexibility
  • Consumers are most comfortable sharing private financial information and account access with their Financial Institution

(c) NACHA

nacha s online payments pilot
NACHA’s Online Payments Pilot
  • Pilot Participants:
    • Buyer’s FI (Guaranteeing ODFI)
    • Seller’s FI (Receiving FI)
    • Businesses (online merchants, billers, state govt. agencies)
    • Third Party providers (enable FI and business customers)
    • eWise (pilot network provider)

(c) NACHA

participation requirements
Participation Requirements
  • Participation Requirements:
    • Buyer’s FI (Guaranteeing ODFI) must be FFIEC compliant for online banking
    • Businesses must be sponsored by a Receiving FI
    • Receiving FI warranties performance of sponsored businesses
    • Resources necessary for integration work with eWise
  • Pilot Fees
    • There is no registration fee to join the pilot
    • Inter-bank and network fees will be collected
    • Fees will vary by transaction type
    • Fee structures have been announced

(c) NACHA

next steps
Next Steps

INTERESTED IN LEARNING MORE ABOUT THIS PAYMENT TYPE AND THE PILOT?

  • Check out the new Online Payments Pilot Website at paymentspilot.nacha.org
  • Contact George Throckmorton at NACHA: gthrockmorton@nacha.org regarding pilot participation
  • Contact eWise at pilot-info@ewisesystems.com for technical and implementation information

(c) NACHA

agenda49
Agenda
  • NACHA/ACH Overview
  • EBIDS (Electronic Billing and Information Delivery Service)
  • Secure Vault Payments
  • Exception Processing Mitigation

(c) NACHA

exception processing mitigation
Exception Processing Mitigation
  • Purpose: to reduce errors (and costs) and improve straight-through processing for bill payment exceptions that originate from online banking systems
    • Sponsored by NACHA’s Council for Electronic Billing and Payment
  • Typical issues
    • Incorrect account number (front-end)
    • Biller account number changes (back-end)
    • Biller metrics for identifying costs
  • Stakeholder costs = $533 million in 2006
    • Consumers-$25.9 million
    • Consumer service providers-$130.6 million
    • Banks/3rd party processors-$14.1 million
    • Billers-$362.7 million

All data from TowerGroup.

All rights retained by TowerGroup.

(c) NACHA

exception processing mitigation what can we do
Exception Processing Mitigation: What Can We Do?
  • Identify best practices to minimize consumer errors (front-end)
  • Develop benchmark biller metrics for identifying the cost of exceptions
  • Define biller/processor processes for account number changes (back-end)
  • Develop a communications plan for maximizing industry outreach

(c) NACHA

summary
Summary
  • NACHA seeking to improve the payments process for billers.
  • More information:
    • NACHA home page
      • http://www.nacha.org
    • Council for Electronic Billing and Payment
      • http://cebp.nacha.org
    • Secure Vault Payments
      • http://securevaultpayments.org

(c) NACHA

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