Reflections on NACHA Payments 2011
Got back this morning after a whirlwind two days in Austin for NACHA Payments 2011. I was in briefings or meetings nearly the whole time, so I barely attended break outs and skipped all of the general sessions, but here are my reflections based on my observations, various conversations on the exhibit floor, and my admittedly limited exposure to the official conference material.
- Mobile Mobile Mobile – No self-respecting payments industry event can ignore mobile. There were a number of sessions devoted to mobile banking and payments, often in conjunction with P2P transactions. Every bank is eager to develop its mobile play (feels a lot like the late 90s when everyone was trying to define their Internet strategy). Despite the largely consumer focus of much of the mobile conversations, there were a smattering of corporate applications – I heard rave reviews of Amy Johnson (Wells Fargo) and Laura Listwan (U.S. Bank)’s presentation on mobile for corporates.
- Security & Fraud – There seemed to be more anxiety over security. It’s hard to know whether it’s just an episodic uptick or a true increase in concern. Recent AFP research on account takeovers may also be fueling interest in fraud and security. And the email breach that has been making headlines (and resulting in a steady stream of contrite messages from name-brand companies admitting the breach in all of our inboxes throughout the week) may have contributed.
- Non-Banks – PayPal had a stronger presence than I recall at past NACHA conferences – they had panelists/presentations on mobile & P2P, global ACH for eCommerce. The Twitter stream was disproportionately PayPal-centric, but that shouldn’t be surprising as the techno-savvy attendees that were tweeting tend to be more focused on the non-bank payment schemes than the general conference population. There was a rumor that Facebook was present, although I can’t confirm it. This seemed to make a number of providers nervous (they were spreading the rumor).
- Regulation – There was curiously little (public) discussion of regulation – and the Durbin Amendment in particular.
- Corporate Advocacy – Wal-Mart and a number of other prominent corporates (many of them members of the AFP Payments Advisory Group) were on hand to present their hopes and desires for the future of ACH. I admire how these companies have collaborated to define their requirement for better payment processing and present them at as many events as possible. I suspect that all corporates will benefit from their persistence (eventually!). Specific changes that Wal-Mart would like to see from the ACH network include same-day ACH clearing (mandatory as opposed to opt-in), same day credits, mobile payments, and corporate eChecks (push ACH transactions). Meanwhile Costco, Target, and Cox Enterprises shared concerns about check-to-ACH conversion of B2B checks (which fouls up existing fraud prevention methods that were designed for checks).
- Healthcare Payments – Healthcare payments are clearly the new hot industry vertical for payment providers – or at least NACHA thinks so. The NACHA conference organizers devoted an entire track to “Healthcare Opportunities” and the keynote speaker was Dr. Robert Bonar, CEO of Dell Children’s Medical Center to address “the intersection of healthcare and technology and the benefits administrative simplification – including payments changes – will have on healthcare providers, insurers, and patients.” (Although, from my perspective, automating a process that is systemically flawed may prove to be a foolhardy investment. There are so many non-technology issues contributing to dysfunction in healthcare, one has to wonder if there is any realistic hope of widespread adoption of the solutions discussed?)
- NACHA News – The latest NACHA stats were published in conjunction with the show. Here at Glenbrook, we haven’t had a chance to dig into them yet, but we’ll post something shortly.
This is my new payments mantra and it should be yours, too. International transactions, B2B remittance data, supplier networks and all kinds of other payment enablers depend on interoperability. I’ve been harping on this theme for a few years now (within the context of B2B payments) so I was heartened to see evidence of it gaining traction in a wide range of settings at NACHA.
The classic network effect is hard to achieve, and involves a lot of effort, good timing, and a fair dose of luck. Rather than focus on trying to get everyone to adopt your standard, or your solution, why not integrate with existing solutions in order to strengthen the over all ecosystem? If the result is more electronic transactions, fewer exceptions, and satisfied customers everyone benefits.
Legal Entity Identifiers
This wasn’t even on my radar (other aspects of the Dodd-Frank bill held my attention!). The concept has been floating around for nearly a decade, but the collapse of Lehman during the financial meltdown brought renewed interest and focus from regulators. Initially LEI will apply to trading activity, in order to help industry participants more easily monitor exposure against specific counterparties and regulators to determine whether any given firm poses systemic risk.
LEI will be assigned at the over all corporate entity level and also at subsidiary levels. Its usage will be standardized Internationally. My immediate thought was, never mind systemic risk, this is the perfect means to route B2B transactions across a myriad of financial systems and payment schemes worldwide!
I’ll be doing further research and share what I learn here on Payments Views. In the meantime, you can learn more about it here.
Recently, I’ve been spending a fair amount of time thinking about global payments [new Glenbrook research here], particularly B2B transactions as opposed to P2P remittances, and spent much of my time at the conference on this topic. I am particularly intrigued by ACH based cross-border transactions as an alternative to wires.
As we’ve covered previously, the Federal Reserve – in conjunction with the IPFA and NACHA – have been working toward ACH interoperability between the US ACH system and other low value, high volume payment systems around the world. These new ACH payments utilize the IAT format that was introduced after much consternation in September 2009. FedGlobal International ACH is not intended to replace wire transfers, but is meant to be an alternative to check payments for non-urgent, low dollar transactions to and from foreign countries. The Fed is partnering with Equens for transactions to/from Europe (SEPA) and with Arias for transactions to/from Latin America.
Volumes processed are modest thus far (there have been some implementation issues) but there is widespread curiosity and interest in how this will pan out. Personally I’ve vacillated between skepticism and enthusiasm, and am currently cautiously optimistic. We’ve got a briefing with the FedGlobal team coming up and will report back here with more details.
Various Odds & Ends
The exhibit hall was relatively small. Although all the big banks were in attendance, and a few had sponsored educational tracks, they didn’t have their usual big booths. Yet, compared to the past few years, when bank and corporate budgets were anemic, there seemed to be a number of substantive conversations going on. My completely anecdotal, informal poll of vendors indicated sales were on the upswing.
Supposedly there were 2400 attendees, but it didn’t feel like that many. At first I didn’t think that there were many corporates in attendance at all, but a number of them attended my presentation on Tuesday afternoon, so I guess they were just keeping a low profile.
I did some interviews for our “Have B2B payments reached the tipping point?” series here on Payments Views, so watch for those in the coming week or two.
And finally, I presented with Mark Brousseau of TAWPI-IAPP-IARP the on e-Invoicing conundrum. After years of investment and effort, there is still only limited supplier participation in EIPP schemes, much to the frustration of buyers. And a large proportion of invoices are still paper based, or only quasi-electronic (Fax, PDF via email) requiring further effort on the part of AP. In our presentation we offered our perspectives on the industry approach to the problem, and shared the results of our Buyer/AP research as well as preliminary results of the Supplier/AR survey that is in progress now. We had an engaged audience and some really good discussion during and immediately afterwards. If you are interested in a copy of the slides or just want to discuss e-Invoicing, let me know.
Sadly, I didn’t have a chance to explore much of Austin – a city I’ve been eager to visit. Just before the conference I was joking with one of the other analysts over Twitter whether any of the residual hipness from SxSW would rub off on Payments 2011 (of course it didn’t). Perhaps SxSW is the Austin event I should be attend next.