Reflections of Nacha Payments 2017

Reflections of Nacha Payments 2017

Analysts have definite fixed points in our year. For me, one is the spring conference season, and which nearly always includes Nacha Payments, the big US payments conference. I was unable to attend last year, so I was particularly looking forward to returning this year. Indeed, there are groups of people I often only see at the event.

After being away, the first thing was that struck the exhibition floor was now much, much smaller. Not just that the stands were smaller, but there were fewer of them as well. Indeed, no banks had stands (though several had meeting “pods”). I also noticed that, at some point (or perhaps I had never noticed it), Nacha had snuck onto the Payments logo the word Faster. And the floor and conference sessions were abuzz with talk of real-time payments.

This had some interesting side effects.

First, the belle of the ball was The Clearing House, with virtually every conversation I had referencing their real-time solution directly or indirectly. Same Day ACH, by comparison, didn’t come up in a single conversation at all. Even in the few sessions I managed to attend, it was only briefly mentioned.

Second, the number of attendees (by our estimates) was up, though still down on a few years ago (my trip report blog for 2012 reported 2,500 vs. the 1800 this year). The result was a definite buzz, particularly on the exhibition floor, where most vendors reported good activity and good levels of conversation.

Third, the topic of conversation was real-time. If name checks in discussions are a valid, albeit unscientific, measure of which real-time solution will succeed, then The Clearing House is significantly ahead of Zelle, but with no other real-time solution even mentioned. Indeed, there seemed to be surprise that so many solutions were going through the Fed process. Whilst the Fed obviously is respecting confidentiality of those going through the process, the vendors themselves need to be very vocal and visible, or they could find themselves being seen as late to the party. I’m party to a number of the names, but I’ve not seen anything from those organisations at all.

Finally, and most interesting, was the sudden appearance of APIs. In Europe, because of PSD2, for the last couple of years, APIs have been something that banks have to discuss because they will become mandated. Their appearance in the US has quite probably been triggered by some of the international banks, but the types of banks discussing them was much broader. In Europe, APIs and real-time will most likely go hand-in-hand – it’ll be interesting whether that will be the case in the US too.

Next year Nacha Payments is back in San Diego. Given where the real-time adoption will be, it’s likely to be a pivotal moment in the industry. I think that sets up the event to be a must attend event. See you in San Diego!

The Clearing House and Real-Time Payments

The Clearing House and Real-Time Payments
The game is afoot! The announcement from The Clearing House regarding real-time payments last week came as no surprise – indeed, it felt inevitable. The Federal Reserves’ significant work around the topic, and their clear determination that it would happen, seems a clear indication that they wouldn’t rest until it was delivered. The question then is how will it be delivered. The Feds conclusion from its consultation was that new infrastructure would be required, rather than re-using existing infrastructure. This posed two questions 1) would the Fed build it themselves? Or 2) do they would expect someone else to build it, and how would that actually happen? We dismissed question 1 pretty quickly – it would have created a monopoly (just about the only in US payments), and the experience of the Fed Same Day service perhaps highlighted they weren’t perhaps best placed to deliver. Who does that leave? Having already nailed their flag to the mast with their Same-Day proposal, and stating that they believed that this was adequately fast and would complement a real-time solution, Nacha was unlikely (at least at this juncture) to put themselves forward. Some seem to have considered the Fed comment about not re-using debit card infrastructure as something of a swipe at PayNet. Given the number of banks already connected to it, and the work around the rules and business model, we think that this rather underestimates what PayNet can do. CME look to have thrown their hat in the ring, with their investment in Dwolla. Whilst CME claim Dwolla is real-time, it isn’t as the chart on Dwolla’s own website even says itself. Yes, in some instances, but equally, it can take up to 4 days. Unless, of course, there is exciting news coming from Dwolla soon….! There are a few other names being mentioned as waiting in the wings – we’ve certainly heard lots of rumours about who else is preparing to announce, though have seen no hard evidence so far. So does this mean that this is a slam dunk for The Clearing House? Not quite. First, to the point around monopolies, we don’t believe the Fed will be satisfied with just one infrastructure, unless it also has a significant shift in policy in mind. Secondly, the Clearing House proposal is very high level. Whilst we’re not saying it won’t be suitable, we’ve yet to see enough to be confident that it will be. The Clearing House has a strong track record in this regard, so we think its just a timing issue. Thirdly, as the proverb suggests, whilst you can lead the horse to water, you can’t necessarily make it drink. We’d define success in this instance as wide-spread uptake. We’re less clear as to how that will happen – will Clearing House Members be mandated to use? Incentivised? As my recent report on real-time payments sets out, the success is in large dependent on how well it is positioned in relation to other payment choices, and how well it is product managed. One thing is for certain though. This won’t be my last blog on the topic – there will be plenty more to happen yet!