Three Lessons Learned at the NACHA Innovation Alliance

by Charlie Youakim 0

Our visit to the NACHA Payments Innovation Alliance meeting in San Francisco was a big success. Leaders from the major banks, the Federal Reserve, NACHA and other groups all met to discuss the trends and changes happening with ACH. There was a lot of talk about innovation, so it was fitting that we were in San Francisco. We thought it would be great to cover our favorite lessons from the event.

Our First Lesson: Payments will Change Rapidly

Uber, Airbnb, Sezzle, Plaid and Verizon were among the 300 or so attendees at this NACHA event. That should tell you something right there. Sure, we were in San Francisco where billions enters the tech space yearly. But, it’s still very telling that these innovative companies were at an event not well known for innovation.

These companies are watching the innovation behind ACH closely. Uber, Airbnb and Verizon take on hundreds of millions of dollars in payments via credit card, costing them millions. Uber alone took in 1.5B in payments in 2015. Adoption of an innovation which could reduce the high cost of taking credit card payments would be significant for these companies.

Venmo was also a common discussion topic and was the top talking point at the Millennial payments panel discussion, where 5 Millennials discussed their approaches to banking and payments. The Millennial panel was interesting, fun and absorbing for many of the long established payments experts in the crowd. It was apparent that Millennials were not up for the established norms – they were going to be pushing for changes.

Here’s how fast technology is moving: one senior member of a major bank we talked with didn’t even know the technology Venmo and Sezzle were using even existed!

Our Second Lesson: Blockchain is Under the Microscope

Blockchain has been in the news ever since Bitcoin tried to take over the world currency market. We think most experts would agree that Bitcoin failed, but those same experts would probably tell you that Blockchain survived.

The idea behind blockchain is that the technology, being an open and visible, would serve as the perfect shared ledger. This is an important idea because it helps everyone involved trust that accounts are being settled fairly.

We sat in on presentation given by Ripple and we found the concept intriguing. Ripple is focused on international payments, because as you can imagine, payments between international bodies have a higher level of distrust. This distrust makes blockchain technology the perfect medium to settle the ledger entries. Their technology looked great, but there are definitely challenges ahead for them and the other young companies in this space.

Can any one company own the technology if the whole point is that it’s supposed to be open and free to all parties to examine? That’s a difficult question to answer, but a fun topic to watch in the payments space.

Our Third Lesson: Same Day ACH is coming Soon.

In September, NACHA and the Federal Reserve are going to be enabling the first stage of same day ACH payments. The first stage is the ACH credit payment. In another 12 months the ACH debit will follow suit with same day settlement.

This is a significant advancement, in that faster payments on the ACH payment rails enables faster business transactions and less confusion on banking statements.

Soon, when you make your payment over ACH, you’ll see that change happen on your statement on the same day, rather than 2 days later.

This change also makes ACH a more compelling competitor to wire payments and credit card payments to merchants, so it’s obviously something Sezzle is very excited about.

We’ll be Watching Closely

It should no surprise that Sezzle, a company built on innovation, would focus its lessons on innovation. But, we didn’t have to try hard. Innovation was a part of just about every conversation we took part in at NACHA. It’s coming to the banking and payments space from all directions. Finovate reports that there are 46 FinTech unicorns, and 38 on the way. Investors are putting money into the space with young companies because they can feel the change coming, as well.

We thoroughly enjoyed learning at NACHA and we’re excited to continue to watch and take part in the innovation that will be happening in the FinTech space. Please feel free to comment or contact us. We’re actively listening to new ideas in FinTech and we’d love to hear your opinion.

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