Check ACH Coalition Halts Activity, for Now

An announcement from the Check ACH Coalition indicates the group will conclude its current efforts to find a new means of transmitting checks via the ACH network. According to the organization, which is comprised of 65 participating financial institutions and associations, the executive committee determined that further design and analysis of the Check ACH process is not likely to yield significant benefit and that the hurdles identified will not allow for the overall project objectives to be achieved. As a result, the coalition will immediately move to conclude the work that is currently in process.

Throughout the last six months, the coalition has brought check and ACH professionals together in a collaborative effort to design a new process for check electronification. "The Coalition specifically analyzed the concept of using the ACH network to transmit payment and image pointer information between banks to clear checks," explains Robert Alpert, director, risk advisory services with KPMG and manager of the project management team assigned to work with the coalition. "In this case the checks were to remain checks throughout the process."

The analysis of the concept uncovered a number of hurdles that challenged the ability of the coalition to develop a process within its guiding principles. The key obstacles included: Check law that requires an agreement to truncate checks. Since reaching the "last mile" would require that all institutions accept Check ACH transactions, current law would limit achievement of the guiding principles. According to Alpert, "Although laws do change, there was concern over how long it might take, and what the outcome and consequences might be." Start-up costs and the on-going costs of float, adjustments and other supporting processes were expected to reduce the financial attractiveness of Check ACH. Continued rapid adoption of image exchange lowered the volume forecast for the Check ACH process to less than 7 percent of total check volume within three years, making the need for a Check ACH process less necessary than originally thought.

Yet the coalition is not giving up just yet. "The coalition is not disbanding, but may change in its makeup as it moves forward," Alpert explains. "We expect that some institutions not previously involved may choose to join and some of the past participants may choose to take a less-active role."

Although it acknowledges much work remains to be done, the coalition's executive team plans to explore how a complementary financial institution-led effort could gain results more quickly while continuing to leverage the collaborative environment between the ACH and Check professionals. These plans are currently being developed and are intended to leverage the lessons learned, momentum and collaboration from the effort now being concluded.

The "guiding principals" of the Check ACH Coalition include: Economically viable for the industry and the individual financial institutions; Payer bank requirements are the key to solution development and acceptance; Checks remain under the Uniform Commercial Code (UCC) and Reg CC; Access to all financial institutions; Customer service levels are maintained or exceeded; Operations/Technology employed are interoperable