In a bid to increase its presence in smaller regional financial institutions, the Electronic Payments Network (EPN) will market its ACH processing services through Western Payments Alliance (WesPay).
EPN, a service of the bank-owned New York Clearing House, provides private-sector ACH payment processing services that compete primarily with the Federal Reserve and with Visa.
Since ACH services are at or near commodity pricing levels, EPN expects software to win the day. For starters, its Windows-based software has won over users of the Federal Reserve's DOS-based system. "If you look at our software suite for mid-sized and small financial institutions, we have a far more superior system," said George Thomas, president and CEO of EPN. Visa doesn't even target the small financial institution market, he added.
However, EPN doesn't have the national sales channel to approach a wide base of financial institution customers. In return for commissions, WesPay will provide support in sales, installation and training. Bank users will rely upon EPN for operational support.
EPN hopes to extend this "franchising" model to other regional payments associations as well. "We want to partner other ACH associations throughout the country," said Thomas. "They already have the relationships with the credit unions and savings banks."
Drawing upon those established relationships can help EPN to extend its network. "What makes networks efficient is volume and ubiquity," said Jerry Milano, CEO of WesPay. "What EPN was able to on its own was volume - to a point - and what they had trouble with was on the ubiquity side."
Since its inception, the ACH network has moved far afield from its original strongholds in government payments and direct deposits. However, the growing importance of ACH as a payments mechanism means that access to the network requires appropriate levels of contingency planning. "ACH has grown to the point where it's virtually necessary to have dual suppliers at any mid-tier or larger institution," said Milano. "It's important that there be competition for this stuff, that's reliable competition, formidable competition and dedicated competition."
That's why WesPay has added EPN to its list of member services. "We wanted to make sure our members had access to all possible processing venues," said Milano.
EPN supports banks' commercial customers through software that translates ACH files into common formats for corporate treasury and cash management packages. "You identify which customers you're selling the service to, and it'll go through every ACH file that you get, look for transactions to that customer and then translate the information," said Thomas. "One of the output streams that we've developed for them goes right into the P&H Politzer & Haney cash management system."
"The Fed has nothing like that," added Thomas.
Going forward, EPN plans to provide same-day settlement for lockbox transactions. "There's been some interest on the part of corporates that are doing ACH to get same-day availability," said EPN's Thomas. "They would get the checks at the lockbox, convert them to ACHs, give them to us in the "day cycle" processing cycle, and then settle right from there."
Same-day settlement would allow companies to update their customer's accounts faster. "Plus, it gives them funding a day earlier," said Thomas.