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									        NACHA Online Payment
Joint Payment Center Conference

      Rob Unger, AAP
      Sr. Director Network Services
 NACHA/ACH Overview
 EBIDS (Electronic Billing and Information
  Delivery Service)
 Secure Vault Payments
 Exception Processing Mitigation

                    (c) NACHA                 2
Introduction to NACHA
 Not for profit association
 Two primary functions
     Establishesoperating rules for Automated
      Clearing House Network
     Trade association to promote electronic

                       (c) NACHA                 3
What is the ACH Network?

   “ACH” stands for Automated Clearing House.
   The ACH Network is an electronic banking
     Batch processing, store and forward
     Transactions are stored during the day and sent to
      the network in batches, usually in the afternoon
      and/or evening
     Transactions are not real-time or online.

   The ACH Network processes both credits and
                         (c) NACHA                         4
Scope of ACH Rules
   18,000 Financial Institutions
   6 million companies
   145 million consumers
   16 billion transactions in 2006
   33 trillion dollars in 2006
     Direct Deposit
     Direct Payment
     Corporate payments
     And   more

                           (c) NACHA   5
ACH Volume Growth
Growth of selected ACH transactions update
                 2005             2006    Increase
Total ACH       13,957           15,984   14.5%

POP               224              356    59.0%
  Avg $ 79
WEB              1,343            1,807   34.5%
  Avg $ 385
ARC              2,154            2,839   31.8%
  Avg $ 290
TEL               319              388    21.5%
  Avg $ 403
                     (c) NACHA                       6
 NACHA/ACH Overview
 EBIDS (Electronic Billing and Information
  Delivery Service)
 Secure Vault Payments
 Exception Processing Mitigation

                    (c) NACHA                 7
EBIDS Discussion

1.   EBIDS Concept
2.   Processes
     1. Biller Enrollment
     2. Consumer Enrollment
     3. Bill Presentment
     4. Bill Payment

3.   Benefits
4.   Pilot Status

                          (c) NACHA   8
Electronic Billing
and Payment Needs
   Despite significant gains, overall EBPP adoption still low
    compared to entire possible volume
   Current state bill presentment/delivery
       Unique customization requirements for bill
       Proprietary channels are the only option for bill delivery
       Greater adoption requires interoperable, secure method for bill
   Current state bill payment
       Check payments still generated from online banking because
        banks don‟t know how to send electronic payments to all billers
       Lack of data/incorrect data from online banking systems
        increases exception processing
   Bill payment is a costly “free” service for banks to
                                  (c) NACHA                               9
The EBIDS Breakthrough
   Bill delivery: The ACH is an interoperable, rules-based,
    secure network that can provide a ubiquitous bill
    delivery/payment channel to thousands of FIs and
    millions of businesses
   Bill payment: The ACH credit model is a low-risk, low-
    cost option that eliminates non-electronic payments and
    user-based exceptions from online banking when
    coupled with bill presentment.
   New revenue paradigm: EBIDS proposes a business
    model for banks to be compensated for enrolling
    consumers and presenting consumers‟ bills, and
    provides a least cost routing option for payment.

   Pilot sponsored by NACHA‟s Council for Electronic
    Billing and Payment
                            (c) NACHA                      10
Electronic Billing Information
Delivery Service (EBIDS)
   Consumer enrolls for ebill via Internet banking with
    consumer‟s bank
   Biller (via a bank) sends summary billing
    information/remittance data in an ACH addenda
    record with a URL to provide access to bill detail
   ACH network serves as „switch‟ and delivers
    summary bill information to consumer‟s bank
   Consumer‟s bank provides billing information to
    consumer via Internet banking system
   Consumer authorizes credit payment, transacted
    through normal ACH processes with remittance data
                          (c) NACHA                        11
     EBIDS Summary Process Flow
1. Enrollment                                           2. Acknowledgement
Consumer enrolls through CFI to receive summary         Billers need to acknowledge EBIDS enrollment requests.
bills from Billers via ACH using ENR                    Biller confirms/rejects an enrollment using the ENR entry

    Consumer Financial Institution (CFI)          ACH Operator              Biller Financial Institution (BFI)

                1                                                                         2              3
                                     3. Bill Presentment
                                     Biller to route the consumer’s next bill to the
                                     CFI using a zero-dollar CTX transaction, with
4                                    the summary bill info embedded in an addenda

             Consumer                                                                      Biller
                            4. Bill Payment
                            Consumers will connect to CFI system to view
                            summary bills and authorize payment to Biller
                                                  (c) NACHA                                                  12
Biller Enrollment
 Allows for data capture, storage and retrieval of
  biller and bank information.
 Supports consumer banks’ need to know which
  billers are participating
 Supports consumer enrollment and delivery of
  electronic payments with remittance data
 Support delivery of epayments without e-bills
 Ensure e-payment and remittance data go to most
  current and correct electronic lockbox
 A web-based application

                       (c) NACHA                 13
Biller Profile Information
Consumer FIs
biller directory
data via XML file,
add biller to their
billpay system
    Consumer Enrollment
                    Automated Enrollment Entry (ENR) via the ACH

             2. Consumer Financial Institution                    3. ACH Operator routes ENR
             (CFI) initiates ENR for each biller and              to appropriate BFI
             transmits entries to ACH Operator

Consumer Financial Institution (CFI)              ACH Operator                 Biller Financial Institution (BFI)

                                                                 4. BFI delivers ENR to biller –
                 1. Consumer enrolls through                     biller enrolls consumer
                 CFI providing the required
                 enrollment info

         Consumer         Consumers may deactivate their EBIDS enrollment through              Biller
                          the same process flow through the CFI
                                                   (c) NACHA                                              16
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(c) NACHA   21
           ENR Sample: “7” Addenda Record
            Record   Addend   Enrollment Related Information                                                           Addend   Entry
            Type     a Type                                                                                            a        Detail
            Code     Code                                                                                              Sequen   Sequence
                                                                                                                       ce       Number
            M        M        R                                                                                        M        M

Contents    ‘7’      ‘05’     Include characters of addenda noted below in 80 character segments in multiple addenda   See      See Field
                                                                                                                       Field    Defs.
Length      1        2        80                                                                                       4        7
Position    01-01    02-03    04-83                                                                                    84-87    88-94
            7        05       <RTN>09100001</RTN><CHKDIG>8</CHKDIG><ENRTYPE>E</ENRTYPE><ENRACTIONCO                    0001     48296323
            7        05       RACTIONCODE><ACCTID>123456789</ACCTID><PAYEEID>2234</PAYEEID><LASTNAME                   0002     48296323
            7        05       STNAME><FIRSTNAME>Stephanie</FIRSTNAME><ADDR1>925 Grand                                  0003     48296323
                              Blvd</ADDR1><ADDR2>8th floor</
            7        05       ADDR2><CITY>KC</CITY><STATE>MO</STATE><POSTALCODE>64198</POSTALCODE><                    0004     48296323
Example     7        05       140000009999999</FIACCT><TOKEN1>225415</TOKEN1><TOKEN2>A152CAJ</TOKEN2>                  0005     48296323

                                                                 (c) NACHA                                                      22
   Enrollment Acknowledgement
                                 ENR Enrollment Confirmation

                3. ACH Operator routes ENR to CFI,                 2. BFI transmits ENR to ACH
                CFI updates bill presentment data                  Operator for delivery to CFI
                system with enrollment status

Consumer Financial Institution (CFI)           ACH Operator                   Biller Financial Institution (BFI)

                                                             1. After accepting ENR, Biller
                                                             transmits acknowledgement to BFI
                                                             to confirm receipt and acceptance
                                                             (or rejection)

                      4. Consumer connects to CFI
                      system to view enrollment

         Consumer                                                                            Biller

                                                     (c) NACHA                                           23
   Bill Presentment
                              Zero-Dollar CTX Bill Presentment

                3. ACH Operator routes CTX to CFI,                 2. BFI transmits CTX to ACH
                CFI updates bill presentment data                  Operator for delivery to the
                system with new bill                               CFI

Consumer Financial Institution (CFI)           ACH Operator                     Biller Financial Institution (BFI)

                                                           1. After receiving ENR and enrolling
                                                           consumer, Biller transmits zero-
                                                           dollar CTX with bill summary data
                                                           embedded in an addenda record

                      4. Consumer logs on to CFI to view

         Consumer                                                                                 Biller

                                                     (c) NACHA                                             24
            Click here
            to see ebill

(c) NACHA                  25
      Bill detail
  from Verizon site
 no sign-in required

(c) NACHA              26
Accessing Full Bill Detail: SAML
Server (Strategic Assertion Markup
   Consumer clicks to “view bill” on the consumer
    FI site then receives bill detail from the biller site
   SAML is a message protocol for passing the
    consumer FI credential to the biller, without
    requiring the consumer to log-in with the biller
   Accomplished through the exchange of
    assertions and seamless to the consumer
   Result: a „single sign on‟
                           (c) NACHA                     27
      CTX (Corporate Trade Exchange) for Bill
      Summary Sent by Biller to Consumer FI – Sample
      “7” Record
                                  CTX ADDENDA RECORD for EACH CONSUMER
                         Addend   Ebill Summary Information                                               Addend    Entry
                Record   a Type                                                                              a     Detail
                Type     Code                                                                             Sequen   Sequen
                Code                                                                                        ce       ce
                                                                                                          Numbe    Numbe
                                                                                                             r        r
                  M        M                                                  O                             M        M

     Contents     7        05                           Include first 80 characters of data noted below   See      See
                                                                                                          Field    Field
                                                                                                          Defs.    Defs.
      Length      1        2                                                  80                             4        7
     Position   01-01    02-03                                              04-83                          84-87    88-94
Example           7        05     <PAYEEID>34980</PAYEEID><ACCTID>4899027763</ACCTID><AMTDUE>120.00</A     0001    766787
                                  MTDUE><MINAM                                                                        8
Example           7        05     TDUE>10.00</MINAMTDUE><DTPMTDUE>20060309</DTPMTDUE><DTBILL>200602        0002    766787
                                  16</DTBILL><PRE                                                                     8
Example           7        05     VBAL>478.34</PREVBAL><ACCTBAL>0.00</ACCTBAL><IMAGEURL>http://www.the     0003    766787
Example           7        05     ll.exe?id=xxkkfj3355kj2l4k55LFRT5436KJT23RE4632WF758VJK56E32JK579642L    0004    766787
                                  </IMAGEURL><DTEXPIR                                                                 8
Example           7        05     E>20070309</DTEXPIRE>                                                    0005    766787
                                                              (c) NACHA                                            28
   Bill Payment
                                            CIE Bill Payment

            2. CFI sends CIE to biller via the ACH                   3. ACH Operator routes CIE to
            Operator                                                 appropriate BFI, BFI credits
                                                                     Biller account

Consumer Financial Institution (CFI)             ACH Operator                       Biller Financial Institution (BFI)

                                                                   4. BFI routes Biller remittance
                1. Consumer authorizes payment to                  identifier data to Biller; Biller
                Biller after viewing summary bill on               credits consumer account
                CFI system

         Consumer                                                                                      Biller

                                                       (c) NACHA                                                29
(c) NACHA   30
(c) NACHA   31
     CIE (Consumer Initiated Entry) Sent by
     Consumer FI to Biller – Sample “6”
                                                        ENTRY DETAIL RECORD (CIE)

           Record   Trans   Receiving DFI     Check     Account             Amount         Individual    Individual       Discre   Addenda     Trace Number
           Type     -       Identification    Digit     Number                             Name          Identification   -        Indicator
           Code     actio                                                                                                 tionar
                    n                                                                                                     y Data

             M       M            M             M              R                 M              R              M            O          M             M

Contents      6     (2)            (3)          (3)            (3)               (4)            (4)           (4)                   Always 0     Assigned by
                    22      Biller’s RTN at    Biller   Biller’s Acct. #     $ amt. Paid      Biller’s    Customer’s      Blank       (no           ODFI
                                  BFI          RTN           at BFI             by the       Customer      account                  addenda)
                                               Check                          customer;       Name        number at
                                               Digit                         zero filled                    Biller
Length/A      1       2          8               1            17                 10             15             22           2           1            15
  lpha-               N      TTTTAAAA            N            A                  N              A              A            A           N            N

Position    01-01   02-03       04-11          12-12        13-29              30-39          40-54          55-76        77-78       79-79         80-94

Example       6      22       23456787           8      123456789012         000000867     STEPHANIE     123456789012                   0      45542779765778
                                                           34567                 3           LEWIS        3456789012                                 8

                                                                           (c) NACHA                                                                 32
Biller Benefits
 Meets preference for multiple channels
 Increased adoption
 Reduces unapplied payments
 Guaranteed funds
 No administrative returns
 Accelerated posting of payment
 Cost reduction
 Improved customer experience
                   (c) NACHA               33
FI Benefits
   Supports online banking: lowers attrition, higher
    account balances, increases cross-sell, lower
    service costs
   EBIDS leverages ACH Network for enrollment,
    presentment, and payment
     Lowest cost channel and best potential reach
     Uses industry standards – NACHA rules
     Non-proprietary
   Provides compensation to consumer‟s financial
    institution – new revenue stream
   Enables a more direct working relationship
    between biller and banks for EBPP
   New revenue opportunity for bill
    delivery/remittance services
                          (c) NACHA
Consumer Benefits
   Privacy of information – financial account
    information remains with financial institution
   Remains in control of account and timing of
   Access to more bills, bills are consolidated at
    one site
   Access to bill detail through single sign on

                         (c) NACHA                    35
Pilot Status
   EBIDS Product Design complete
       Processes, rules, and data formats for consumer enrollment,
        presentment and payment
   Biller Directory complete
   SAML Server – in final testing phase
   Pilot revenue model complete
   Participant system update and integration - ongoing
   Target date for launching transactions: 3rd quarter 2007

                                 (c) NACHA                            36
 NACHA/ACH Overview
 EBIDS (Electronic Billing and Information
  Delivery Service)
 Secure Vault Payments
 Exception Processing Mitigation

                    (c) NACHA                 37
    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
      35% of online orders are flagged for manual review related to fraud
       detection (CyberSource Corp., cited in Digital Transactions 6/13/06)
      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)

                                                     (c) NACHA                      38
Market Drivers Cont.
   Businesses want payment options
    − 72% of consumers surveyed say the have abandoned an online purchase
    − 74% of consumers willing to spend $960 more per year (Javelin Strategy
      and Research, 7/06)
    − 24% of consumers report shopping less online (Visa news release, 1/06)

   Open new markets
    − Digital content – music, games, subscriptions, video
    − Last-minute/expedited payments

   Online account opening
    −   Bank reliance on non-bank providers – CashEdge,Yodlee

   Guaranteed & authenticated payment options for billers
    −   Card issuers
    −   Mortgage and loan payments
    −   Bank-centric substitute for biller-direct

                                       (c) NACHA                        39
The Private, Secure, Bank-Authenticated
Payments Solution
   „Secure Vault‟ simply refers to using online banking to
    initiate Internet payments
   Consumers keep financial information private – never
    disclosed to the seller

   Seller receives real-time authorization of guaranteed
    payment (ACH Credit)
   Financial Institution authenticates the buyer, reducing risk,
    fraud, and charge backs
   Relieves seller burden to secure/protect consumer
    financial information
                             (c) NACHA                        40
 Consumer Purchases
 Bill Payments
 Funds Transfers

                 (c) NACHA   41
Key Features
 Bank customers keep financial information
  private – never disclosed to businesses
 Bank leverages existing online banking
  platform and connections to payment
 Bank receives interchange revenue for
  authenticating existing customer and
  guaranteeing payment
 Bank is central to its customers‟
                   (c) NACHA              42
Stakeholder Benefits – Businesses

   Real-time authorization of a guaranteed payment
    (ACH Credit)
   Sales lift – new customers, higher tickets, more
    purchases, less shopping cart abandonment
   FI Authentication - reduces risk, fraud and
    charge backs
   Eliminate need to secure/protect customers‟
    financial data

                        (c) NACHA                 43
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
   Leverage customer relationships
   Grow the eCommerce „pie‟ and enable new
    online transactions
   Take a leadership role in privacy
                         (c) NACHA                   44
Stakeholder Benefits – Consumers

 Security and privacy – no financial
  information shared with the seller
 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

                    (c) NACHA               45
    NACHA‟s Online Payments Pilot
   Pilot Participants:
     Buyer‟s  FI (Guaranteeing ODFI)
     Seller‟s FI (Receiving FI)
     Businesses (online merchants, billers, state
      govt. agencies)
     Third Party providers (enable FI and business
     eWise (pilot network provider)

                          (c) NACHA                   46
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
      Inter-bank and network fees will be collected
      Fees will vary by transaction type
      Fee structures have been announced

                                  (c) NACHA                          47
Next Steps

   Check out the new Online Payments Pilot Website at

   Contact George Throckmorton at NACHA: regarding pilot participation

   Contact eWise at for
    technical and implementation information

                           (c) NACHA                        48
 NACHA/ACH Overview
 EBIDS (Electronic Billing and Information
  Delivery Service)
 Secure Vault Payments
 Exception Processing Mitigation

                    (c) NACHA                 49
Exception Processing Mitigation
   Purpose: to reduce errors (and costs) and improve
    straight-through processing for bill payment exceptions
    that originate from online banking systems
       Sponsored by NACHA‟s Council for Electronic Billing and
   Typical issues
       Incorrect account number (front-end)
       Biller account number changes (back-end)
       Biller metrics for identifying costs
   Stakeholder costs = $533 million in 2006
       Consumers-$25.9 million
       Consumer service providers-$130.6 million
       Banks/3rd party processors-$14.1 million    All data from TowerGroup.
                                                    All rights retained by TowerGroup.
       Billers-$362.7 million
                                (c) NACHA                                     50
Exception Processing Mitigation:
What Can We Do?
   Identify best practices to minimize consumer
    errors (front-end)
   Develop benchmark biller metrics for identifying
    the cost of exceptions
   Define biller/processor processes for account
    number changes (back-end)
   Develop a communications plan for maximizing
    industry outreach

                         (c) NACHA                     51
   NACHA seeking to improve the payments
    process for billers.
   More information:
     NACHA      home page
     Council    for Electronic Billing and Payment
     Secure    Vault Payments

                                   (c) NACHA          52

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