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NACHA to Demonstrate Project ACTION's Bank-Centric Internet Payment System

Business Case Estimates New Banking Industry Revenue of $1 Billion in 5th Year from Internet Payment and Authentication Services

The Board of Directors of NACHA - The Electronic Payments Association has approved moving to the next phase of Project ACTION. "Phase 2" will be a proof-of-concept project to build and test the bank-centric Internet payment system developed by Project ACTION's members. Under this phase, NACHA plans to form a limited liability corporation, recruit financial institution owners of the corporation, issue a request for proposals, build the ACTION infrastructure, and conduct live transactions.

"The financial institution members of Project ACTION determined that it makes sense to pursue a proof-of-concept phase," said Steve Ellis, Executive Vice President of Wells Fargo and Company, who chaired ACTION's Financial Institutions Committee.

Project ACTION - ACH Credit Transactions Initiated Online - is an effort to solve the privacy, security and authentication issues related to Internet payments. The members of Project ACTION have completed a business case that estimates new banking industry revenue of $1 billion in its 5th year of operation from Internet payment and authentication products and services.

"The ACTION business case shows that financial institutions can make money by providing value-added Internet-based payment and authentication services to their deposit customers," said Charles B. Bretz, Senior Vice President of Compass Bank, who chaired Phase 1 of Project ACTION.

"ACTION puts the financial institution's brand at the center of its customers' e-commerce transactions, and is a new income opportunity for depository financial institutions of any type and size."

"Privacy and security are the primary concerns of consumers and businesses that currently do not conduct transactions on the Internet," said Mark Havlik, Senior Vice President of Wachovia, a Project ACTION member.

"Project ACTION could provide a banking-industry solution for payment privacy and customer authentication on the Internet." A key feature of ACTION is that a consumer or a business would initiate a payment on the Internet via its own financial institution, instead of providing financial information to a merchant or biller and authorizing a debit to its account. This is also known as a "credit-push" payment model.

"By leveraging financial institutions' existing ability to authenticate their own deposit customers, ACTION would enable Internet payments that are private, secure, and low-risk," added Ellis.

The ACTION payment model provides compelling benefits to all parties to an Internet transaction. Financial institutions would gain new revenue by providing Internet merchants and billers with customer authentication and real-time payment guarantees. Financial institutions would also strengthen their online brands and deepen their customer relationships by becoming central to their customers' transactions.

Consumers and businesses would benefit from the privacy and security of initiating payments through their existing financial institutions. Account numbers would not be provided to Internet merchants or billers, but instead would remain with their financial institutions.

Internet merchants and billers would benefit by receiving real-time payment guarantees, receiving payment by an irrevocable automated clearing house (ACH) credit, and being relieved of the burden of authenticating buyers and protecting buyers' financial information.

"ACTION is a great value proposition for banks," said Avivah Litan, Vice President and Research Director, Payment Systems, Gartner, Inc. "Financial institutions are the most trusted brands on the Internet, and there is a clear opportunity for them to deliver private and secure Internet transactions."

"The marketplace is searching for widespread customer authentication solutions," said James Van Dyke, Principal and Founder of Javelin Strategy and Research. "Financial institutions already have the ability to authenticate their customers online, and should be considered a viable alternative to the authentication solutions being proposed by technology companies."

NACHA will hold a teleseminar on Project ACTION on October 30, 2002 from 1:30 - 3:00 p.m. Additional information about Project ACTION and the teleseminar is available at

About NACHA - The Electronic Payments Association NACHA is the leading organization in developing electronic solutions to improve the payments system. NACHA represents more than 12,000 financial institutions through direct memberships and a network of regional payments associations, and 650 organizations through its industry councils. NACHA develops operating rules and business practices for the Automated Clearing House (ACH) Network and for electronic payments in the areas of Internet commerce, electronic bill and invoice presentment and payment (EBPP, EIPP), e-checks, financial electronic data interchange (EDI), international payments, and electronic benefits transfer (EBT).

First published on 10/14/02

First published on 10/14/2002

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