While all the talk within the payment industry seems laser-focused on the march toward a world of real-time payments, established ACH payments ecosystems face a predicament: How should banks modernize, upgrade or even replace a 30-year-old payment system that currently works just fine. ACH payments are not going anywhere. However, financial institutions must still provide for the increased speed of money transfers that customers demand.
Here’s how to breathe new life into your ACH payment processing, so you can stay relevant for decades to come.
A Justified Fear of Renovation?
ACH payments remain central to all processors as the volumes increase steadily year-over-year. However, there are two fundamental problems: the ACH systems that underpin the market are outdated and are filled with proprietary custom code, and that code is less and less supported. Consequently, banks of all sizes are understandably reticent to modernize what are seen as fragile services.
The problem is that mission-critical ACH payment systems present high internal risk, and significantly constrain banks moving forward. Meanwhile, customers are increasingly demanding a more real-time experience from their payment processors. In other words, fear may be understandable, but it’s unsustainable.
While ACH processing is unlikely to shift to a real-time rail anytime soon – payroll payments are not well suited to real-time processing as they are scheduled, recurring and batched, for example – there are strong business needs for customers to receive notifications, view data and obtain payment status in near real time. Incumbent solutions are simply incapable of supporting such requirements. Fortunately, a better option exists.
A Tried and Tested ACH Overhaul
Financial institutions looking to revamp their ACH payment processing cannot wait for legacy partners to reinvent outdated solutions. Instead, they need to engage a partner who can migrate them toward a service that can provide customers with quick feedback on payment statuses and funds availability. Such a system also must embrace distributed computing and real-time responses in place of a monolithic back-office system that restricts innovation and service upgrades.
At FIS, after many years implementing ACH payment installations around the world, we have learned how to best structure such undertakings. These systems do not operate in isolation, and FIS has the experience to deploy solutions that interface with other established back-office services, such as accounting and general ledger, which is of paramount importance.
FIS aims to provide thought leadership in ACH implementation strategies to limit risk and achieve aggressive time-to-market goals, including comprehensive standardization for posting across different payment rails.
Instant Gratification with ACH
Improved processing services for clients, along with operational efficiencies within a financial institution, often help recoup the cost of updating an ACH system. The settlement of payments may be overnight or end-of-day, but customers can receive near-instant feedback on the status of various payments and be reassured that the funds are available for the payments submitted. Therefore, fulfilling the demand for immediacy that consumers have come to expect in all facets of their lives.
It also is important to remember that payment services do not operate in silos; ACH and wires may be imperative, but the march toward real-time payment services continues. At FIS, we have adopted a hub-oriented perspective on payments where an ACH solution is built on an underlying foundation framework that can also support real-time payments, check processing and other payment-related solutions. The benefit is that there is no need to develop a completely custom ACH solution independent from other payment services. This is different than established legacy platform providers who may be four or five years behind the curve because they will need a wholesale rebuild of their ACH platform.
ACH Within an Enterprise Strategy
Many financial institutions have accepted that ACH payments need to coexist alongside real-time payments. As such, many are looking to make a decision that allows them to move toward a common, enterprise payments platform for long-term relevance. As they look ahead, banks are trying to pick a platform that can handle ACH and wires with the emerging demand for real-time. To respond to these changing needs, FIS offers a migration plan toward modern ACH processing as a stand-alone service or one that combines multiple payment services from a centralized payment hub and satisfies a wider enterprise strategy.
The current delicate and restrictive nature of incumbent ACH processing solutions means that modernizing is perceived as risky and intimidating. Fortunately, FIS has a proven track record of leading hundreds of financial institutions toward the goal of consistent, interlaced payment services across the enterprise with minimal risk.
Migrating to a modern ACH service can be a manageable undertaking with the right partner, solution, and tools to accelerate the process for proven long-term success.