A trusted core fundamental of the payments industry, ACH transactions have provided consumers and businesses with safe, secure means of transacting critical payments for decades. Operating quietly behind the scenes, the need to provide low-cost, secure, and flexible account-to-account transfers to power a wide variety of payments threw a spotlight on ACH as a go-to payment form and NACHA as its go-to governing body.
With the introduction of Same Day ACH transactions into the market, the network has entered a new phase of competitive capabilities for a wider range than ever of consumer and commercial payment strategies. In this interview with Jan Estep, NACHA’s CEO since 2008, she talks about the changes she’s seen take place in the market, new opportunities for the organization’s stakeholders, how to build value through collaboration, and what some of the key drivers will be of the future payments industry.
You’ve been leading the NACHA organization since 2008, what would you say have been its greatest accomplishments from that time until now?
It’s interesting you ask this, because I would describe the last eight years as a great learning curve personally and one that dovetailed with significant accomplishments for the organization. When I joined NACHA, I realized that many individuals, including me, used ACH every day, but didn’t know the payment type very well.
ACH, unlike other payment forms, doesn’t have a material form-factor connected to it – no touch and feel. I like to use the metaphor of ACH as “Intel Inside.” The ACH Network helps our payments eco-system flow. For example, half of the volume on ACH is bill payment and a third of the volume is direct deposit – clearly bread and butter payments, but many don’t recognize these as ACH payments. I believe one of NACHA’s biggest accomplishments over the last few years has been to increase external market education, and to bring more visibility and knowledge of ACH to the industry. This includes helping users understand the benefits of ACH payments that relate to their own payments needs.
A second accomplishment was bringing the entire industry together to launch Same Day ACH. One of the key value propositions of the ACH Network is its ubiquity – that the ability of anyone to reach every bank and credit union in the country in the same way via ACH. So, as of September 2016, 100% of all financial institutions in the United States will “turn on Same Day” at the same time, and be ready to receive Same Day ACH payments. NACHA has been, and will continue to be, focused on disseminating information and knowledge to the market on how the variety of ways to use this new capability.
Thinking about the payments industry, what is your view of its biggest challenges and opportunities in the coming decade?
In thinking about the future, I have one simple answer – how rapidly technology is changing. I worked for IBM for many years and know how transformative technology can be. Keeping up with change, technology change in particular, and understanding its impact is the biggest challenge and as well as the biggest opportunity our industry faces.
Are there fundamental differences between how a large vs small institution approaches this?
This is very dependent on the institution itself, not necessarily dependent on size alone; however, there is a difference in how organizations can partner with others to help them deliver new technology and service offerings. An example might be APIs, where you may want to partner with others to leverage their APIs, or you may want to develop your own. Partnering in efficient and collaborative ways will be key to the way that financial institutions address the future. Importantly, this doesn’t mean size is a competitive advantage. This is also true for fintech companies that may have great products or services, but need partners to expand in a way that allows for long term viability. I think of it as “match makers” and building partnerships that benefit one another.
Consumer mobile payments gain a lot of attention, but the commercial market is increasingly being targeted by fintech developers. What do you think are the big changes in market dynamics for the commercial segment?
Consumer payments that have been successful have taken friction out and have taken cost out of the transaction. So when you do both, it is a successful mobile application rather than just applying the mobile technology without a clear benefit. Those organizations that support businesses can apply these same attributes to the problem – taking friction out of the service and cost reduction.
In the ACH Network, there are a huge variety of commercial payments available, but the Network itself is “skinny” and designed to provide a solid foundation on which others can innovate. This sets up the opportunity to provide services on top of the Network, while capitalizing on the Network’s ability to send a tremendous amount of information that can flow directly with the payments. Taking a more holistic view of the market, I can say that commercial providers can combine information with their payment to provide value and take steps out of the payment process to improve efficiency.
What we will see are services that are built around core capabilities that will allow for user choice based on timing of the payment and on information that can flow with the payment. If both of these things can be controlled, then you have the ultimate sense of control for the entity making the payment, resulting in improved cash management and liquidity. This is accomplished in part through the strategic use of ACH addenda records (remittance information), which at up to 9,999 allow for a great deal of data to be moved along with the financial payment. Now businesses can also choose the speed of their ACH payment – same day, next day, or value-dated.
As electronic commercial payments continue to expand outside of closed eco-systems, where there is a well-rationalized flow, there will be an increased need to address standardized flows in an open environment.
Click here to download the NACHA - Corporate Toolkit for Same Day ACH.
Cross-border payments are increasingly important drivers in the market for consumers and businesses. What are some of the ways NACHA is addressing the needs of a global eco-system?
The ACH Network has had global ACH payments for several decades and it continues to bring together global payments participants in the industry. One of NACHA’s core capabilities is to bring diverse participants together through councils, and now through our Payments Innovation Alliance. A decade ago, one of these councils developed the concept of interoperability between ACHs, utilizing a thin rules framework and ISO 20022 in the middle to transmit ACH payments between countries.
Separate from that and its importance as means of placing the organization in context with its global peers, NACHA also regularly compares notes with their counterparts in other countries. Their challenges and opportunities are very much the same as ours and there is great learning from sharing among this group. This includes topics such as cyber-threats and new payment technology, as well as task-oriented topics like AML.
In an organization like NACHA, that is member-driven, what are some of the best practices in gaining consensus to move strategic initiatives forward and meet the demands of market that is rapidly evolving?
I believe strongly that the key to success is in gathering as much fact-based input as possible. I have my own process that I call “Cascading Whys.” If you ask “why” enough, you get to the root cause, concern or opportunity. The balance is in knowing when you have enough information to illuminate a clear path, and then to bring the information together in order to make a decision or proposal for people to respond to. I believe that people respond better to concrete proposals and as a process best practice, more input leads to a better output.
On the other hand, I’ve found that if the output remains muddy and unclear, maybe it means you drop the initiative and move on to something else.
But does collaboration slow development down?
If you looked at things that are usually labeled as innovative, more often than not those ideas are ones that come to market quickly because they’re done by one company acting alone. The challenge of the payments industry is that it is a complex eco-system – with multi-party payment systems contributing great value – and as a result you need to use this iterative type of process to gain input and just continue to fine-tune it based on experience.
You have a diverse background, having worked at a technology company, an environmental laboratory company, and a bank before joining NACHA. What advice can you give other senior managers that are thinking about taking on larger roles and greater strategic responsibilities?
I would advise them to create a continuous learning environment for oneself. I graduated from a liberal arts college with majors in economics and psychology; then I joined IBM when they were looking to bring in non-tech people because they had too many engineers and they wanted to train people that came from other disciplines. I made the leap to do that because the greatest skill I had acquired with a liberal arts background was to “learn how to learn” and to be continually curious.
I believe this makes one more rounded and a better leader. Confidence is built by listening, by understanding the facts, and by being open to new learning. I am also an incessant reader, and then I parse what I learn from reading as well, which also helps to builds confidence. It is the same as going to school, if you’re willing to immerse yourself in new topics, you can learn and build confidence along the way.
Jan Estep is president and CEO of NACHA, the trustee and rule‐maker of the ACH Network, which moves 24 billion electronic payments valued at $41 trillion annually. NACHA brings together diverse organizations through inclusive and adaptable processes to develop rules and standards to benefit payments ecosystem participants. In addition to ACH, NACHA provides rules and standards leadership for Electronic Benefits Transfer (EBT) and healthcare EFT, and collaborates with other standards
organizations and geographies to facilitate compatibility or integration with payments in the U.S.
Estep serves on the Federal Reserve’s Faster Payments Task Force Steering Committee and participates on the ACI Worldwide, ETA, EHNAC, CAQH CORE and Women in Payments Symposium boards and coordinating bodies. Estep has been named to PaymentsSource’s list of Most Influential Women in Payments each year since 2013.
Prior to joining NACHA, she led transaction services at U.S. Bank and previously held positions in technology‐intensive companies.
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