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Industry Update What’s New in Payments?. Carolinas Cash Adventure May 16, 2011. Gary B. Nesbitt, AAP Senior Vice President Member Services, Finance and Administration, EastPay 704.366.7292. Alicia Treadway, AAP, CTP First Vice President, Product Management

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industry update what s new in payments

Industry UpdateWhat’s New in Payments?

Carolinas Cash Adventure

May 16, 2011

Gary B. Nesbitt, AAP

Senior Vice President

Member Services, Finance and Administration, EastPay


  • Alicia Treadway, AAP, CTP
  • First Vice President, Product Management
  • Treasury & Payment Solutions, SunTrust Bank
  • 404.588.8274

This presentation and applicable materials are intended for general education purposes and nothing in this presentation should be considered to be legal, accounting or tax advice.

You should contact your own attorney, accountant or tax professional with any specific questions you might have related to this presentation that are of a legal, accounting or tax nature.


about eastpay
About EastPay

Not-for-Profit Trade Association

Active Nationally

  • NACHA Board
  • NACHA Council Steering Committees
  • Rules Work Groups
  • Members of local & national AFP

100+ Training Opportunities Annually

7 AAP on staff

750+ members (VA, NC, FL, WV)


about suntrust
About SunTrust

Corporate Headquarters

Key Locations

SunTrust Banks, Inc., headquartered in Atlanta, is one of the nation's largest banking organizations, serving a broad range of consumer, commercial, corporate and institutional clients. 

As of December 31, 2010, SunTrust had total assets of $172.9 billion. 

SunTrust operates an extensive branch and ATM network throughout the high-growth Southeast and Mid-Atlantic states and serves clients in selected markets nationally.

SunTrust provides clients with a full array of technology-based, 24-hour delivery channels, including Internet, PC, Automated Telephone Banking and Mobile Banking.


  • ACH Historical Timeline
  • 2010 Rules Simplification Initiative
  • WEB Mobile Rule
  • 2011 Rule Changes
  • 2010 Federal Reserve Payments Study
  • 2010 ACH Network Volume Statistics
  • Potential/Upcoming ACH Rule Changes
  • Fedwire Format Changes (Expanded Remittance)


2010 rules simplification initiative
2010 Rules Simplification Initiative
  • Grouped by participant role – ODFI, RDFI, Etc.
  • More user-friendly, clearer and consistent language
  • Information easier to find
  • Easier to understand
  • Underlying meaning of the specific Rules were not altered


web mobile effective january 1 2011
WEB / Mobile – effective January 1, 2011

What’s a WEB?

  • Debit entry to a consumer account pursuant to an authorization that is obtained from the Receiver over the Internet
  • Recurring or Single Payments
  • WEB SEC Code

WEB Mobile Rule

  • Defines Wireless Network
  • Expand the definition of Internet-Initiated Entries (WEB) to include ACH debits authorized and/or initiated via Wireless Network
  • Apply all provisions of the WEB SEC Code to mobile consumer debit entries
  • Revise the definition of Unsecured Electronic Network to include wireless networks and provide additional clarification to the industry
    • Voice or keypad inputs on wireless phone to live operator or VRU are not subject to secure connection requirement


rules supplement 1 2011
Rules Supplement #1 - 2011
  • Audits for Third Party Senders
  • Elimination of Obsolete Language – FI Closed
  • RDFI Obligation to Return a Credit
  • Clarification for Dishonors/Contested Dishonors
  • Elimination of Warranties of Associations Language
  • Eliminate Audit Provisions – Return Information
  • Clarification for Revocation of Authorization for Single Entry Authorizations


elimination of opt out requirement for arc boc
Elimination of Opt Out Requirement for ARC & BOC

This Rule removes the requirements for ARC and BOC entries that Originators must have procedures to allow Receivers to opt out of check conversion.

  • The opt out option is not required by Regulation E.
    • Eliminating opt out requirements simplifies Originators’ processes.
  • Originators can provide an option to opt out, if they wish to do so.


rule changes effective september 16 2011
Rule Changes Effective September 16, 2011
  • Ballot #3 - Recurring TEL Transactions
  • Ballot #5 - Collection of Return Fees
  • Ballot #6 - Expanded Use of XCK Application


recurring tel
Recurring TEL


  • Oral authorization must comply with e-Sign Act
  • Keeps existing prohibition on outbound telemarketing
  • Keeps existing requirement to audio record authorization

Originators must retain records of Authorization

  • Same 2 year requirement

Single Entry TEL does not work for some applications

  • New billing relationships – biller wants to set up recurring bill payment while customer is on the phone; for example:
    • Insurance policies
    • Loan payments

Many of these payments are currently collected by remotely created checks


recurring tel authorization requirements
Recurring TEL Authorization Requirements

Originators must ensure that their method of obtaining authorization for recurring debits to a consumer account complies with Regulation E.

The oral authorization must:

  • be readily identifiable as an authorization of a recurring transfer from the Receiver’s account
  • state the terms of the recurring transfer clearly and in readily understandable terms
  • verify the Receiver’s identity
  • evidence the Receiver’s assent to the authorization


recurring tel authorization requirements1
Recurring TEL Authorization Requirements

The authorization of the Receiver recorded by the Originator must include:

  • name or identity of the Receiver;
  • telephone number for Receiver inquiries that is answered during normal business hours;
  • date of the Receiver’s oral authorization;
  • specific authorization language;
  • account to be debited;
  • timing, number and/or frequency of the debits; and
  • amount of the debit, or reference the method of determining the amount of recurring transfers.


recurring tel rule changes
Recurring TEL – Rule Changes

Payment Type Code

  • Field must contain “R” for Recurring TEL transactions
  • Originators can identify Single Entry TEL with an “S” or leave the field blank
    • Allowing this field to remain space-filled eliminates need to re-program systems or software for those only doing single entry


collection of return fees
Collection of Return Fees

Definition of Return Fee

    • A fee charged by an Originator to a Receiver for a debit Entry or other item that was returned for insufficient or uncollected funds, to the extent permitted by applicable Legal Requirements


  • Return fees for unpaid items permitted and governed by state laws and Regulation E
  • NACHA Operating Rules has required collection of return fee to be separately authorized in writing and signed

This Rule:

  • aligns the Rules with Regulation E
  • lowers barriers for a legitimate use of the ACH Network by Originators, enabling an alternative to the use of RCCs
  • Time limits for origination of Return Entry


collection of return fees1
Collection of Return Fees

Originator may originate a “Return Fee Entry” in relation to the return of:

  • Debit entry to a Consumer account.
  • ARC/ BOC /POP entry to a non-consumer account
  • An item that was eligible to be converted to a debit entry, but was not converted to an entry

Also when returned due to:

  • Return of a check (check must be marked to indicate it was returned due to NSF or uncollected funds)
  • Return of an Entry (entry returned R01 or R09)


collection of return fees2
Collection of Return Fees

Authorization of Return Fee Entries

  • By providing notice at the time the underlying entry is being authorized or the original item accepted

Notice MUST include the following or substantially similar language:

  • If your payment is returned unpaid, you authorize us to make a one-time electronic funds transfer from your account to collect a fee of [$ ]; OR
  • If your payment is returned unpaid, you authorize us to make a one-time electronic funds transfer from your account to collect a fee. The fee will be determined [by/as follows]: [$ ]


collection of return fees3
Collection of Return Fees

SEC Code = PPD (when notice is used)

  • Individual Identification Number field MUST contain check serial number
  • Other form of authorization – use appropriate SEC Code

Company Entry Description field (in batch header) MUST contain the words “RETURN FEE”

  • Return Fee Entries must be sent as a separate batch

Company Name field (in batch header)

  • For Return Fee Entry for ACH – name of Originator
  • For Return Fee Entry for Item – name of Payee

Originator MAY impose only ONE Return Fee in relation to an underlying entry (ACH) or item (check) and it MUST have a settlement date within 45 days of the settlement date of the underlying debit entry (ACH) or the return of the underlying item (check)


2010 federal reserve payments study
2010 Federal Reserve Payments Study

This is the fourth triennial edition of the Federal Reserve Payments Study (2000, 2003, 2006, 2009).

In partnership with McKinsey and Company, Federal Reserve Retail Payments Office, and the Federal Reserve Board of Governors

Study is comprised of three surveys-

  • The depository institution study (1312 respondents)
  • The electronic payment study (94 respondents)
  • The check sample study (3500 checks)

To a certain extent, the results of this study may have been impacted modestly by the state of the economy in 2009-2010.

The study can be found under the research tab at under the News and Communications/Research tab.

  • SOURCE: Federal Reserve Payments Study


2010 federal reserve payments study1
2010 Federal Reserve Payments Study
  • In 2009, nearly 80% of noncash payments were electronic; the most used instrument was debit card, eclipsing check.

1 Prepaid includes EBT.

  • SOURCE: Federal Reserve Payments Study


2010 federal reserve payments study2
2010 Federal Reserve Payments Study
  • Cards were used for 60% of noncash transactions but only 5% by value; ACH and check were the dominant instruments by dollar value.

1 Prepaid includes EBT.

  • SOURCE: Federal Reserve Payments Study


2010 federal reserve payments study3
2010 Federal Reserve Payments Study
  • Check writing continued to decline since the last study, but the growth of check conversion to ACH slowed dramatically.

Number of checks written, paid, or converted to ACH (in billions)

Figures may not add up to 100% due to rounding.

  • SOURCE: Federal Reserve Payments Study


2010 federal reserve payments study4
2010 Federal Reserve Payments Study
  • Consumer-to-business checks are declining at a faster rate than business checks
  • Number of checks written by counterparty1 (in billions)

Figures may not add up to 100% due to rounding.



1 Estimates are based on a random sample of checks processed by the Viewpointe archive member banks. Data includes banks that participated in both the 2006 and 2009 Federal Reserve Check Sample Study. “C” refers to consumer. “B” refers to businesses, nonprofits, or government organizations. “P2P” refers to person-to-person.

  • SOURCE: Federal Reserve Payments Study


2010 federal reserve payments study5
2010 Federal Reserve Payments Study
  • A slowdown in check conversion growth slowed overall ACH growth; other forms of ACH grew more quickly than check conversion

Number of ACH payments by type (in billions)

Figures may not add up to 100% due to rounding





  • SOURCE: Federal Reserve Payments Study


2010 federal reserve payments study6
2010 Federal Reserve Payments Study

What Does It All Mean?

  • The payments system continues its sometimes reluctant, drive to electronics.
  • Checks are declining at an increasing rate, but are not dead yet.
  • The continuing redefinition of the demographics of the American consumer is a critical aspect of change over time.
  • The results imply a need to think more deeply about future investments in payments technology- we can’t do it all at once.


ach network volume statistics
ACH Network Volume Statistics

2010 ACH Volume Exceeds 19.4 Billion

  • The number of Automated Clearing House (ACH) Network payments exceeded 19.4 billion in 2010.
  • Increase of 3.44 percent compared to a year ago, according to NACHA. The number of ACH payments transmitted via the ACH Operators was more than 15.61 billion transactions. Of these, there were 9.26 billion debits and 6.36 billion credits. Volume transmitted via the ACH Operators includes commercial inter-bank and Federal government transactions, but not “on-us” transactions.
  • The overall figure of 19.4 billion includes on-us transactions self-reported by financial institutions.


potential upcoming rule changes
Potential/Upcoming Rule Changes

IAT Enhancements – RFI/RFC

Request for Comment and Information out now:

  • IAT Effect of Illegality
  • Clarification of Rules Exceptions
  • Minimum description standards
  • Gateway Notice of Rejected Inbound IAT
  • Timing of Gateway Return Entry Identification of Foreign Funding FI
  • Clarification of Originator ID Field
  • Etc…


potential upcoming rule changes1
Potential/Upcoming Rule Changes

ACH Data Security

  • Comprehensive approach to ACH data security in the Rules
  • Request for Information out now.
    • Protection of Sensitive ACH Data
    • Access Controls
    • Self Assessment
    • Verification of Receiver Identity, TPS and Originators
    • Fraud Management Systems


underway in 2011
Underway in 2011

Extended Return Timeframe for Adjustments - RFC

  • Extend the period during which an RDFI may transmit an adjustment entry related to an unauthorized entry from 60 days to 90 days
    • RFC and Survey done in 2010.

Allow XML-formatted data in Payment-Related Information field of addenda records for B2B payments (CTX, CCD)

NOCs for single entries

Authorization for corporate payments

Use of return reason codes for stop payments

  • (stop one, stop multiple, stop all future)


healthcare payments
Healthcare Payments

Rules Product Group developing Rules proposal to accommodate full support of healthcare EFT payments within the ACH Network. These may include:

  • End-to-end HIPAA compliance (may require a unique SEC code for identification of payment and ease HIPAA compliance)
  • Appropriate length of remittance in order to carry the payment plus all associated information.
  • Potential creation of EFT provider enrollment process to reduce potential for fraud and to encourage utilization of EFT

Anticipate Request For Comment 1Q 2011

Additional information:


risk management issues
Risk Management Issues

Enhancements to Network Enforcement Rule:

  • Lower 1% return threshold
  • Apply to administrative returns

Return Code for Failure to Pay (related to Third-Party Senders)

Third-Party Sender Registration

Annual Audit Date

Prohibition on SSN in ACH Transactions

Excused Delay

  • Anticipate Request for Comment – 1st Quarter 2011


not ready for primetime
Not Ready for Primetime
  • Near Field Communication Payments
    • Mobile Payments by NFC Chip
    • Smartphones
    • iPad 2


corporate customer needs

Payments are migrating to electronic –ACH or Wire?

What do companies need and want?

Remittance data and “straight through” processing (STP)

Post to their accts receivable system in automated way

Identified 10 basic elements that they need to identify and post the payment; can be used for ACH also.

National AFP worked with FRB & TCH

TCH has worked with several accounting software vendors

FRB and The Clearing House have done research

Business-to-Business Wire Transfer Payments: Customer Preferences and Opportunities for Financial Institutions

Corporate Customer Needs


fedwire format changes
Fedwire Format Changes

Based on the research that Fed & TCH did on businesses need for remittance information along with payment, FRB is expanding the message format.

Research indicated that if key data was provided with the wire, business could streamline their A/R postings.

Business indicated that they would be willing to pay for such services.

To take advantage of this opportunity to provide a service that clients will pay for, do you have processes in place to provide advices to clients?

While UCC4A requires sending advices, many FIs have “varied” that requirement in the depositor’s agreement (like ACH).



EastPay, Inc.

  • Education/Customized Training
    • In-person
    • On-site
    • Web Conferences/Webcasts
    • Teleseminars
  • Consulting
  • Publications
    • 2011 ACH Quick Reference Guide
    • 2011 Return Reason Code Guide
    • Authorizations
    • Stop Payment Form (Revised 2010)
    • Written Statement of Unauthorized Debit (Revised 2010)