Heavy Hitters Join Forces on Direct E-Payment Standard

Membership targets for Project ACTION — a program through which consumers and businesses would initiate payments to a seller via their own financial institutions, rather than authorizing the seller to debit their accounts — have been reached, the Electronic Payments Association announced Tuesday.

According to the not-for-profit association, also known as the National Automated Clearing House Association (NACHA), Project ACTION enhances security of payments while reducing many of the risks.

“There are currently no guaranteed payments on the Internet today,” NACHA spokesperson Michael Herd told the E-Commerce Times. “So the ACTION model would be an improvement, should it come to pass.”

“ACTION can solve the authentication, security and privacy issues associated with authorizing payments on the Internet,” project chairman Charles B. Bretz said. “The ACTION model provides compelling benefits for buyers and sellers on the Internet, and represents new business opportunities for financial institutions.”

Members supporting the initiative have defined their main objective as the development of a detailed business case for a core product to support consumer-to-business payments, consumer bill payments, and business-to-business payments.

Project ACTION, which stands for ACH Credit Transactions Initiated Online, is an independent membership program within NACHA.

January Launch Targeted

Project ACTION Internet transactions will be conducted using Automated Clearing House (ACH) credits. The ACH network is the transfer system that clears most of the electronic payments sent between banks and other financial institutions in the United States.

NACHA said that 36 organizations, including 12 financial institutions, have signed on to the project, which has targeted January for completion of its e-commerce transfers standard.

According to Herd, merchants would no longer be required to authenticate the purchaser making the online payment. Instead, the payment model relies on the existing relationship between the purchaser and his financial institution, and also gives the bank the opportunity to charge a fee for the e-payment service.

“An advantage of the ACH Network is the ability to process credit payments in which funds are pushed to sellers or other payment recipients,” said Elliott C. McEntee, president and chief executive officer of NACHA. “Currently, other payment methods require account information to be provided to sellers, that then attempt to authenticate the buyer and pull funds from buyers’ accounts.”

Big Agenda

Project ACTION will address the business and technical requirements for processing ACH credits online, including the fee structure and revenue model, as well as the framework for dispute resolution and chargebacks. The members have also determined that ACTION will initially focus on ACH credit payments.

“Although the ACTION model may turn out to be applicable to other payment networks, we will be developing the initial business case based on use of the ACH credit,” Bretz said.

Thane Plambeck of VeriSign and Rebecca Watson of the U.S. Postal Service are some of the high-profile e-commerce leaders that were elected to the project’s Steering Committee, while JP Morgan Chase, the State Employees’ Credit Union and TeleCheck are among the latest organizations to join to the group.

“NACHA set a goal of 25 members, including 10 financial institutions, by July 1st to get Project ACTION off the ground,” said McEntee. “Project ACTION has exceeded this membership goal, reflecting the strong interest in the project in the financial services industry.”

Wide Representation

Other members of Project ACTION include: Bank One, CheckFree Corporation, Citibank, Fidelity Investments, FirstWebBancorp, Fort Knox National Company, InteliData Technologies Corp., iBill, LML Payment Systems, Mid-America Payment Exchange, Network 1 Financial, VeriSign Inc. and Wells Fargo Bank.

In addition to the ACH clearinghouse network itself, the U.S. Federal Reserve, the Electronic Payments Network and credit card powerhouse Visa act as ACH Operators — or central clearing facilities — through which financial institutions transmit or receive ACH entries.

NACHA represents more than 12,000 financial institutions in the United States.