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Table of Contents

Lead Story

Payments under the radar no more


Industry Update

FTC bites YMA

NACHA clarifies ACH rules spreads the mentoring net

VeriFone vows to fix faulty accounting

Fifth Third banks on gift card kiosks

PayPal eyeing more merchants

Free terminals are thorny


New ATM security measures tackle fraud

Uwe Krause


Rock, paper, electronics

Patti Murphy
The Takoma Group

Run from mean streets to clean streets

Steve Schwimmer
Renaissance Merchant Services


Street SmartsSM:
New year, new plan

Dee Karawadra
Impact PaySystem

MLS or ISO: Which one are you?

Adam Atlas
Attorney at Law

Visa, PCI council make security move

Michael Petitti

E-mail: It takes a plan

Nancy Drexler
Marketing Moguls

Receipts still reveal too much

David Mertz
Compliance Security Partners LLC

Company Profile

Credomatic USA

Barclay Square Leasing Inc.

New Products

Dialing for digital content

BSG Clearing Solutions

Card printer of a different stripe

Zebra P100i
Zebra Card Printer Solutions


Before you move on





Resource Guide


A Bigger Thing

The Green Sheet Online Edition

December 26, 2007  •  Issue 07:12:02

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NACHA clarifies ACH rules

The field of debit cards is tight, and some banks are feeling a pinch from the surfacing of decoupled debit cards. But just how far are these banks willing to go to keep a hold on stakes they originally claimed? In November 2007, NACHA - The Electronic Payments Association issued a clarification of a rule regarding transaction aggregation after receiving a request to do so.

Some experts say banks sought the clarification because they are targeting Capital One Financial Corp.'s new decoupled debit card in the hopes the card will be pulled from the shelves.

NACHA stated transactions requiring settlement to payees within 14 days may not be bundled. This will affect transactions linked to POS debit cards that are PIN-protected but rely on the automated clearing house (ACH) for settlement.

Capital One's new MasterCard Worldwide-branded debit card, introduced in June 2007, allows merchants to issue co-branded debit cards linked to consumers' existing demand deposit accounts.

Consumers do not need to change their existing bank relationship. Instead, funds are pulled from the consumers' account via ACH. (For more information, see "Changes afoot for signature debit," by Ken Musante, The Green Sheet, Nov. 12, 2007, 07:11:01)

The card is often referred to as decoupled because it separates the relationship between the issuer and the demand-deposit account backing the card. The NACHA rule description raises costs for Capital One, as it is forced to reprogram systems that were designed for aggregation. Instead, the company will have to pay ACH origination fees on each transaction instead of on bundles of payments.

There might be a silver lining in NACHA's rule. Ken Musante, President of Humboldt Merchant Services, thinks it would be in Capital One's best interest to not bundle payments. "Not only would [bundling payments] create cardholder confusion, but it would be frustrating for cardholders to initiate disputes," Mustante said.

"Were [Capital One] to launch this product with bundled debit transactions, it would leave them vulnerable to attacks from the traditional issuers that do provide a description with each transaction. I would expect most cardholders would prefer the existing structure to a higher reward offering (even if the debit and credit rewards were combined)." Musante acknowledged Capital One's expenses will increase, but the product will only find success if two instances occur:

"They could do this in a myriad of ways, such as partnering with a National ATM network or providing one-time rewards for establishing a DDA [demand deposit account] with Capital One," Musante said. "This would dovetail well with their existing credit card offering by providing low cost deposits and leveraging the customer base."

No one knows for sure whether banks played a role in this. But one thing is for certain: Banks are starting to feel the heat. "Banks are threatened because there is a land grab for deposit relationships," Musante said. "Managing the DDA makes that financial institution likely to also house that customer's savings accounts. Banks are being disintermediated by credit unions, insurance companies, brokerage houses and online financial institutions.

"Banks have maintained the primary deposit relationship, in part, by maintaining the check card/debit card relationship. If this product becomes distributed in the same fashion as the credit card, banks could lose their grip on their customer base and with it, their deposit base."

NACHA officials have denied the rule clarification is aimed directly at Capital One. The ruling, officials stated, will affect several businesses.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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