Latest News

Nacha & International ACH 3/27 IPF The banking industry has experimented with payments standards for years with varied success. One of the latest initiatives, spearheaded by the International Payments Framework (IPF), takes aim at cross-border ACH transactions. According to Priscilla Holland, Nacha, IPF is an outgrowth Nacha’s Global Payments Forum. IPF was established to develop rules, processes, guidelines & service-level agreements among its members to make it easier to perform cross-border payments for their customers. ‘So if you’re a US bank & want to offer cross-border payments in other countries, you can join the IPF & will know that the other members are processing the payments the same way, using the same standards. Today, doing cross-border payments involves a variety of processing windows, rules & formats that differ by country.’ Demand for cross-border payments is rising among both individuals & corporates as more people & companies buy goods from overseas or send money back to family in other countries. Standards will help reduce the cost to customers. ‘Corporates are switching from letters of credit to open account for their payments. Anything you can do to reduce that transaction is helpful, versus their having to pay for an international wire, which tends to be more costly than ACH.’ The IPF plans to use the ISO 20022 standard for financial messaging - which is being used for transactions in SEPA - as its framework. ‘We’re expanding the use of ISO 20022. SEPA was good for consumers, but it cost the banks a great deal of money. They can now take what they did for SEPA & go global with it. The IPF is a better way to get banks to cooperate & recognize economies of scale to provide these services.’ While SEPA changed the domestic ACH rules, ‘We’re just building a bridge so that it’s easier for banks to swing from one country to another.’ Holland acknowledges that standardization will further the commoditization of payments. But ‘If you standardize payments, you can reduce your internal costs & management burden. This way, banks can concentrate on the value-added services.’ While the majority of the IPF’s members are large financial institutions & ACH operators smaller banks can join themselves or benefit from the IPF if their ACH operator becomes a member. ‘The Fed has expressed interest in joining. So if they join, then all the downstream banks would benefit.’ During Phase I of the initiative, which was launched in 1/07, the committee recommended members use the SwiftNet FileAct platform as the mechanism to exchange the payments. Other networks can be used, but members would have to take additional steps to ensure the security of the transactions. 30 institutions have joined the IPF, including BofA, JPMorganChase, Royal Bank of Canada, Bank of Tokyo-Mitsubishi, Voca & Swiss Interbank Clearing. The goal of Phase II, which is underway, is to begin processing transactions between member organizations by IVQ 2009.