Magazine article American Banker

National Automated Clearing House Assn. Moves to Take Lead in Electronic Benefits

Magazine article American Banker

National Automated Clearing House Assn. Moves to Take Lead in Electronic Benefits

Article excerpt

The National Automated Clearing House Association is making a bold and controversial bid to play a key coordinating role in electronic benefits transfer systems.

With strong backing from federal and state officials, but against the resistance of some electronic banking networks and processors, the bank dominated payments association has formed an EBT Council.

Its objective is to set operating rules for distributing welfare, food stamps, and other government benefits through automated teller machines and point of sale terminals.

Claiming it has the necessary experience in rulemaking and in mediating between the public and private sectors, Nacha contends it can assemble the "stakeholders" - ranging from banks and government agencies to retailers and data processors - that together can turn the long-delayed, fragmented EBT phenomenon into a nationwide reality.

Since Nacha's core constituency includes 14,000 financial institutions, the Herndon, Va.-based association's involvement could mollify bankers' fears that they might lose control over EBT payment systems.

Then again, banks also own the regional ATM networks that believe they have better ideas for managing EBT.

Two full weeks before the EBT Council's first meeting in Washington, it already has endorsements from prominent government players led by the Federal EBT Task Force and the National Association of State Auditors, Comptrollers, and Treasurers.

Buoyed by that support and the bankers on his board, Nacha president and chief executive officer Elliott C. McEntee said he is optimistic that a system of rules can be in place by October, in time to be stipulated in some state EBT contracts.

Mr. McEntee, who has spent several months conferring with federal and state EBT officials and laying the groundwork for the council, said he hopes to sign 40 initial members in five categories to which votes will be allocated: government entities, card-issuing financial institutions, merchant-acquiring institutions, retail merchants, processors and other service providers, and payment networks.

The last two may pose some problems.

"Nobody really knows who will show up at their party," said Tom McLaughlin, vice president of government services at Deluxe Data in Milwaukee, which processes EBT transactions in Maryland, New Jersey, and elsewhere.

Mr. McLaughlin is chairman of the EBT Industry Council of the Electronic Funds Transfer Association, which is skeptical of the new council despite its otherwise friendly relations with Nacha.

He opposes centralization of authority in any entity that will have its own identity, dues structure, and potentially bureaucracy. …

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