Private, Secure, Guaranteed ACH Credits – The Next Generation of Online Payments

Samantha Carrier, Director, eCommerce, NACHA

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Agenda Market Demand

The Payment Method Defined

Demos

Stakeholder Benefits

The Pilot Defined

The Role of eWise

Pilot Timeline

Q&A

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Market Drivers Rapid growth of Internet commerce has led to industry challenges.

Security and privacy concerns 50% of US Internet users avoid making purchases online, afraid

financial information may be stolen (CyberSecurity Alliance Research 5/06)

Nearly half of consumers avoid online Bill Pay due to security concerns (comScore Networks, cited in American Banker 4/20/06)

Alternative online payments will account for 26% of eCommerce volume by 2009 (Celent, 5/06)

Continued fraud and chargebacks 6% of good sales lost due to fraud/risk screening (Cardline 2005)

Fraud is the top reason given for chargebacks on several networks (American Banker interviews with network executives, 1/17/06)

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Market Drivers Cont. Businesses want payment options

− 72% of consumers surveyed say the have abandoned an online payment

− 23% of households don’t have a credit card− 45% of households w/in 5% of credit limit

State and Federal Agencies want payment options− High fees with existing payment options− Paper based payments prevalent

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The Private, Secure, Bank-Authenticated Payments Solution

‘Credit Push’ simply refers to using online banking to initiate Internet payments

Consumers keep financial information private – never disclosed to the seller/business

Seller/business receives real-time authorization of guaranteed payment (ACH Credit)

Financial Institution authenticates the buyer, reducing risk, fraud, and charge backs

Relieves seller/business burden to secure/protect consumer financial information

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Demos Consumer Purchases Bill Payments Funds Transfers

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Stakeholder Benefits – State Governments Real-time authorization of a guaranteed

payment (ACH Credit)

Increase use of electronic payments

Reduce costs

FI Authentication - reduces risk and fraud

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Stakeholder Benefits – Consumers

Security and privacy – no financial information shared with the seller/business

Familiar user interface with online banking More payment control and flexibility Consumers are most comfortable sharing

private financial information and account access with their Financial Institution

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Stakeholder Benefit - FIs

Use existing infrastructure - costs to support this channel have increased in the areas of authentication and security (FFIEC Guidance)

Create new potential revenue stream - FIs generate little direct revenue from the online banking channel today

Grow the eCommerce ‘pie’ and enable new online transactions

Take a leadership role in privacy

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NACHA’s Online Payments Pilot

Consumer transactions tested: online bill payments, purchases, account to account funds transfers

Why run a pilot? Evaluate potential markets for new online payment

type w/privacy, security and guaranteed payment features

Evaluate level and structure of fees and impact on adoption

Determine costs, benefits and net economic benefit to all stakeholders

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NACHA’s Online Payments Pilot

Pilot Participants:Buyer’s FI (Guaranteeing ODFI) Seller’s FI (Receiving FI)Businesses (state and federal govt. agencies,

online merchants, billers)Third Party providers (enable FI and business

customers)eWise (pilot network provider)

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Participation Requirements Participation Requirements:

Buyer’s FI (Guaranteeing ODFI) must be FFIEC compliant for online banking

Businesses must be sponsored by a Receiving FI Receiving FI warranties performance of sponsored

businesses Resources necessary for integration work with eWise

Pilot Fees There is no registration fee to join the pilot Interchange and network fees will be collected Fees will vary by transaction type

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About eWise eWise is an international provider of online payment systems and

online banking applications – offices in US, UK and Australia

Patented technology

Customers include major international Fortune 500 banks

Selected as technology provider for NACHA’s POC in January 2005

Successfully completed the POC technical test - meeting or exceeding all success criteria

Will provide the eWise network as the Pilot Processor

eWise network hosted & supported by Unisys Outsourcing

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Pilot Timeline

Recruitment is currently underway

Complete Pilot design by December 2006

Pilot launch in 2007

Pilot run time 12 months

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Next Steps

INTERESTED IN LEARNING MORE ABOUT THIS PAYMENT TYPE AND THE PILOT?

Check out the new Online Payments Pilot Website at paymentspilot.nacha.org

Contact Samantha Carrier at NACHA: scarrier@nacha.org regarding pilot participation

Contact eWise at pilot-info@ewisesystems.com for technical and implementation information

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Q&A