The ACH network has long been used for recurring bills and direct deposit of checks. Now, it's being considered for a more comprehensive application: electronic bill payment and presentment (EBPP).
The Federal Reserve and the Electronic Payments Association have completed a successful proof-of-concept conducted with Allegheny Power and Dollar Bank, both of Pittsburgh. "The proof-of-concept demonstrated that the ACH would work for billing," says Mike Taipale, manager of product development, Federal Reserve Bank of Cleveland.
Now, they seek to demonstrate how the ACH network can be used throughout the entire lifespan of a bill. The upcoming October pilot, sponsored by Jack Henry (Monett, Mo.), will be extended to encompass a wider range of billers beyond just power companies as in the proof-of-concept. "In that pilot, we'll take the other verticals, such as telecom, or insurance," says Taipale.
THE LIFE OF A BILL
In order to request payment, the first thing a biller must know is a customer's address. That's true in the real world, through e-mail, and in the proposed ACH implementation. Somehow, customers have to get their bank account numbers to each of their billers. That's where the banks might come in. "We're focusing on completing an enrollment solution through your bank site," says Taipale. "If the financial institution is involved in the enrollment process, you're going to get that ABA and routing transit number correct."
Using a valid address, the biller can then request payment. While the ACH network will not carry detailed bills, it will have a place for an Internet address that can contain whatever the biller wants to display.
When receiving payment, billers can benefit from receiving good-funds through the ACH network. When customers pay online at a "biller-direct" site, the biller then has to issue a request for funds and wait up to five days for a response. The use of the ACH would eliminate many of those exception processes. "Your bank isn't going to send any money, anywhere, if you don't have any money in your account," Taipale says.
Furthermore, using ACH rules, the customer would know exactly when a payment would be made. Currently, bill-payment "consolidator" sites typically indicate when a payment was made, not when it was received.
Using ACH for EBPP, banks would have a strong claim to become the consolidator sites for online bill payment, Taipale says. "You write your checks from that account-why not pay them electronically?"