Evolution of Online Banking ePayments in the US

2006-2015: NACHA’s Secure Vault Payments—Act 1 of Online Banking ePayments in the US

Following in the footsteps of iDEAL in the Netherlands and Giropay in Germany, NACHA, administrator of the US ACH network, issued an RFP to build a real-time OBeP payment network for the US market:

  • eWise, PayWithMyBank’s parent company, won the competitive RFP, and entered into an exclusive partnership agreement with NACHA to build and operate the platform
  • NACHA developed the operating rules, eWise operated the platform, and the Secure Vault Payments network was born: https://www.nationalach.com/secure-vault-payments/
  • Bank participants included US Bank, PNC, Regions, Wells Fargo, and many smaller FIs

Product characteristics:

  • All banks enabled via direct (API) connections to their online and core banking systems
  • Real-time good funds access – no risk of NSF (ACH credit push vs. ACH debit pull)
  • Consumer redirected from merchant site to their bank’s OBeP web application
  • Merchant pricing below card interchange
  • Revenue share between the consumer’s bank, NACHA, eWise, and the merchant’s bank

Secure Vault Payments ultimately hit a chicken and egg problem whereby:

  • Banks (beyond the initial enabled participants, representing ~10% of the online banking population) stated that the required IT integration effort to enable their online banking customer base was difficult to prioritize before having a proven business case based on proven merchant demand
  • Large merchants would not adopt before having at least 50% of the country’s online banking population enabled to transact on the network

2012-2016: PayWithMyBank—Act 2 of Online Banking ePayments in the US

Due to the chicken and egg challenge mentioned above, growth in the Secure Vault Payments network stalled in 2011, and the platform was ultimately taken offline December 31, 2015

eWise pivoted in 2012 and, in consultation with the banks, devised a new approach to market based on a more accommodating bank participation program:

  • Banks’ IT resources were removed from the critical path towards achieving a critical mass of enabled online banking customers by using their public websites as APIs and direct consumer consent as legal framework – using the same approach as Envestnet (Yodlee), Fiserv (CashEdge), Intuit, NCR (Digital Insight), Finicity and others
  • Banks were given a way to participate in the network on their own timeframe:
    – Without any IT involvement yet with a small share in the revenue
    – With some IT involvement (exposing an API to provide real-time good funds access) with a larger share in the revenue

With a critical mass of online banking customers enabled on day one, eWise had solved the chicken and egg problem, and was finally in a position to focus on merchant adoption:

  • eWise named the new OBeP network PayWithMyBank, and ultimately renamed its payments division PayWithMyBank, Inc.: http://www.paywithmybank.com
  • PayWithMyBank still owns the Secure Vault Payments platform source code and patents

PayWithMyBank has since stayed in contact with the banks and NACHA, updating them on merchant adoption

2016: Banking industry moving towards building APIs

  • Following the success of PFM site operators (online banking sites and brokerages, Intuit’s Mint) and a myriad of FinTech startups aggregating banking data on a nightly batch basis for PFM, investment management, credit scoring and other financial/payments applications, the banks (including Bank of America, Chase and Wells Fargo) are reporting that their customers clearly want these innovative applications so they need to support them
  • However, they are also saying that the technology used to date, web data aggregation (a.k.a “screen scraping”), is expensive from an IT resource perspective (because of the nightly batch process central to PFM solutions) and not optimal as creating a third party information broker situation in the middle, which disintermediate banks’ relationship with customers
  • In response, some banks recently announced the development of APIs to let third parties access customer data
  • Our perspective: Evolution towards open bank APIs will happen, but it will be a process—and not an event—due to the substantial investments required by banks to get there

The road ahead

  • PayWithMyBank has been seeking bank participation for years
  • We are eager to connect to bank APIs when they are available
  • We believe that banks, led by their treasury services departments, will ultimately work with PayWithMyBank, the natural successor to NACHA’s Secure Vault Payments, to make ACH safer and fit for e-commerce