Creating A Smooth Transaction

The National Automated Clearing House Association, or NACHA, is perhaps best known as the governing body of the automated clearing house, orACH, electronic payment system. But the 31-member Herndon, Va.-based group also sponsors a number of initiatives aimed at making money movement across various electronic channels more efficient and safer. One such initiative is Project ACTION, an attempt by NACHA to use the existing ACH network to bring trust and security to Internet-based purchases, in large part by making financial institutions more involved in the front end of the buying process.

NACHA is headed by Janet C. Boyst, chair of the organization's Board of Directors and senior vice president and group executive for Wachovia Bank, and Elliot C. McEntee, the association's president and chief executive officer. Both took some time to talk to BS&T editor in chief Paul Doocey about Project ACTION. Here are some excerpts from the interview.

BS&T: Why did you feel the need to create Project ACTION?

McENTEE: Project ACTION addresses a lot of problems associated with current payment systems and transactions that are initiated over the Internet. Those problems deal with security, privacy, and the lack of guaranteed payment. We're attempting to utilize the credit function of the ACH network to provide a guaranteed payment to the seller, which will also address the security and privacy concerns consumers and other organizations have when they buy over the Net.

BS&T: How will it operate?

McENTEE: It's a very simple concept. Let's say the buyer wishes to purchase a product over the Internet. They will go to the seller's Web site and click on Project ACTION. A drop down menu will appear listing the various financial institutions around the country involved in this system. The buyer will click onto their institution. That bank Web site will show up and ask them to log on through their usual Web banking PIN number or password.

While this process is taking place, the buyer's bank will be in contact with the seller. The seller will give that bank the reference number of the transaction, and information on where they want the money sent.

Meanwhile, the buyer's bank comes back to the buyer and asks if they want the payment made. If they click yes, then the bank makes sure there is enough money in the buyer's account to cover the transaction. If everything's fine, the bank will then send the Internet transaction to the seller, telling the seller that an ACH credit payment will be coming through the ACH network. This is a guaranteed payment since the buyer's financial institution checks the balance before it's sent off.

BS&T: Would Wachovia participate in a system built along these lines?

BOYST: Very much so, especially if it alleviates consumer concerns about providing financial information over the Internet.

We're also interested because Project ACTION brings our customers to our Web site, and cements our relationship as their trusted financial partner.

BS&T: It also brings banks to the front end of the transaction process.

BOYST: Absolutely.

BS&T: As a bank do you really feel comfortable moving to the front end of the buying process?

BOYST: Phase two of Project ACTION is going to more fully flesh out those issues and explore all those options. But at this point, I think we do want to become more of a participant with our customers in the transaction process.

BS&T: But won't this require more investment in both people and technology?

BOYST: I believe Elliot and his staff have interviewed software providers who say it should not be that intrusive.

McENTEE: We've talked to a number of software service providers, for both large and small banks. They're all very excited about it. What they've offered is to build a module that would hook onto the Web-based transaction packages they already offer banks. You get the feeling on the part of these software providers that this would not be a major undertaking.

BS&T: When will Project Action be ready for rollout?

McENTEE: We think it will take at least six more months to complete phase two, including the completion of product design, making sure security requirements are met, and establishing a business case. After that, if we're comfortable enough, we could role out the product. But my guess is that we will pilot test it sometime next year before taking that step.

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2001 CMP Media LLC. 7/1/01, Issue # 3807, page 40.