Magazine article American Banker

Clearing Houses Seek to Bypass Fed; Visa, 2 Regional Operators Hold Preliminary Talks

Magazine article American Banker

Clearing Houses Seek to Bypass Fed; Visa, 2 Regional Operators Hold Preliminary Talks

Article excerpt

Clearing Houses Seek to Bypass Fed

Visa, 2 Regional Operators Hold Preliminary Talks

Officials from Visa USA and the New York and Arizona automated clearing house associations met early this month to discuss ways to bypass the Federal Reserve's payment system.

The talks were preliminary. Participants said an agreement would enable the clearing house associations to lower their fees to member banks by as much as a third.

Banks that use an ACH service do so to make recurring payments, such as company payrolls, taxes, and bill payments. The Federal Reserve has an 80% share of ACH processing volume.

Speed and Savings

"The private sector needs to join together on services it can do better than the Fed at a lower cost," said Paul Finch Sr., president and chief operating officer of the Arizona Clearing House Association.

A national private ACH system could process transactions faster than the Fed.

The added speed would reduce the risk that a bank will lose money if a corporate customer goes out of business.

A 3-Day Delay

The Arizona ACH offers a same-day settlement service, while the Fed processes transactions over three days. In one case, that means banks must pay out funds for corporate payrolls three days before employees receive funds in their accounts.

Arizona, the smallest of the three private clearing houses, pays the Fed about $40,000 a month in fees. Mr. Finch said about half of those fees would be eliminated if the private ACH organizations were to transfer transactions among themselves. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.