NACHA’s Project Action has signed up 36 members.
Payment method is a key issue in eCommerce. Retailers must provide potential customers with a system that is secure, convenient and reliable, and which also meets their own needs by being verifiable, accurate and quick. Most payments on the Internet are made through credit cards, although this is not ideal. Dozens of high-profile fraud cases have highlighted the security and privacy problems inherent in using credit cards online.
The National Automated Clearing House Association (NACHA) initiated Project Action with the goal of developing an alternative payment method. This would take advantage of the existing automated clearing house (ACH) system of handling electronic payments. Project Action now has 36 members, 12 of which are financial institutions. By January 2002, Project Action aims to create a detailed business case for accepting ACH payments in eCommerce.
There are several advantages to using ACH credit to settle eCommerce transactions. The ‘back-end’ systems for handling transfers of electronic funds between financial institutions already exist and are in widespread use and are proven to be speedy, reliable and secure. All that is required is that both parties in the transaction have bank accounts. ACH credit can handle a wide range of transaction sizes.
The main improvement over credit card transactions is the enhanced security and privacy of the system. Customers paying with ACH credit will not have to transmit sensitive details, such as credit card numbers and expiry dates. Instead, they send an instruction to their bank to pay a certain amount to the retailer. The bank does so, and deducts that sum from the purchaser’s account. Retailers are also protected from fraud, since the bank, not the customer, pays them. Consequently, they will not have to set up complicated systems for authenticating the customer.
ACH has the potential to become a leading eCommerce payment method, especially as it now has the support of major financial institutions. For customers it offers a secure, reliable and convenient system, while retailers are guaranteed speedy, accurate and trustworthy transactions.
