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With Phixius, Nacha Sets Its Sights on Modernizing and Streamlining the Payments Process
Payments are
humming across a variety of rails to countless businesses and consumers at any
given moment in the U.S. With so many available payment methods, end users, and
use cases, the payments landscape can be a tangled web of rules and
regulations.
It also can be a
challenge for industry stakeholders to navigate the often complicated payments
world, prompting calls for a simplified and automated process for exchanging
payment-related information. Financial institutions of all sizes and
specialties, as well as payment processors, emerging fintechs, and many others would
benefit from such a process.
With a large
cross-section of the payments world in need of a solution, Nacha has responded with
Phixius,
an online platform that brings together technology, rules, and participants to
streamline and modernize how payment information is exchanged. Nacha plans to
make Phixius available to early adopter organizations in May 2020.
To learn more
about Phixius, PaymentsJournal sat down with George Throckmorton, Nacha’s managing
director of Strategic Initiatives & Network Development.
During the
conversation, Throckmorton spoke about the current issues with exchanging
payment information, how Phixius addresses these pain points, and why Nacha is
well positioned to lead these modernization efforts.
A solution to a problem 10 years in the
making
The payments
industry has contended with an inefficient means of exchanging payment-related
information for at least a decade. Yet, the problems do not lie in “making” the
payments.
“It’s not just about
the routing of payments. I think that’s a misconception,” said Throckmorton. “When
we talk about payment-related information, it’s about the authenticity and
richness of that information.” Bundled into the authenticity of the data is a
range of important aspects of making a payment, including invoicing, compliance
data, and payment remittance.
One central
issue connecting all of these aspects is a lack of automation. “When payment
information is exchanged today, it’s very manually intensive,” said
Throckmorton. Companies often rely on phone calls, emails, and even the U.S.
Postal Service to exchange the relevant information. These methods are slow, prone
to human error, and costly.
The lack of
standardization is another problem that organizations encounter while
attempting to exchange payment information. “How I get that information, the
formatting, and which channel it comes in also add complexity to the process,”
explained Throckmorton.
A related issue
is also the lack of interoperability. Over the past decade, different players
in the industry have set up proprietary directories that are very effective in
supporting the exchange of payment-related data. However, these directories
often do not connect with each other.
“So if I want
to exchange information with others that are not in my particular network or
solution, that’s where it becomes more difficult,” said Throckmorton. Small to
medium-sized organizations are particularly affected by interoperability issues
because they often can’t participate in multiple networks or solutions.
The last issue
identified by Throckmorton was fraud protection. Ensuring that the information
is reliable and accurate is of crucial importance for all of the parties to a
transaction. One common fraud vector is to send a business a request to change
information to later defraud the business. To validate that the request is
indeed authentic, companies often rely on manual checks, such as a phone call or
email, to verify the user’s identity.
Phixius solves pain points by utilizing
emerging technologies, rules, and industry participants
After surveying
all of these problems, Nacha began developing a solution. The company hired
technology partner Ernst & Young LLP (EY) to help develop a product that could
be brought to market. In 2019, Nacha developed and demonstrated a proof of
concept to the industry, and after reviewing and incorporating industry
feedback, Nacha developed Phixius.
“It’s a
platform for the secure exchange of payment-related information,” said
Throckmorton.
He stressed
that Phixius is not a directory. Instead it is platform to enable
interoperability that utilizes emerging technologies – including distributed
ledger, RESTful APIs, and cloud-based environments – to allow its users to more
easily and securely exchange information without centralizing data.
Phixius also
supports real-time alerts and messaging, allowing payment information to be
securely changed. For example, a
business can change payment instructions and every organization that has
previously received information will immediately be notified of the change, said
Throckmorton, noting this reduces fraud such as business email compromise.
“There is no
directory or database in the sky that everyone is going to, and creating risk,”
said Throckmorton.
Phixius also
supports real-time alerts and messaging, allowing payment information to be
securely changed when needed. For example, “people can change bank accounts and
they can change their preferences on what they want for remittance,” said
Throckmorton, noting that these changes can occur in real time.
Underlying
Phixius’ effectiveness is a set of participant rules. “We all have to agree
that we’re going to act the same way, we understand the transactions we’re
going to exchange, and what those mean,” explained Throckmorton. To this end,
Nacha developed and now oversees a set of operating rules that govern the
platform, covering issues ranging from liabilities to warranties. These rules
provide confidence and certainty to everyone connected to the platform.
The last aspect
of Phixius worth noting is its network of participants. Social media platforms
become more effective when more people are a part of the network, and Phixius
is no exception.
However, the
platform is designed such that only financial institutions and service
providers are directly connected. In turn, these businesses provide products
and services to their clients, meaning that Phixius “requires a smaller number
of endpoints to create value for all the businesses,” noted Throckmorton.
Why Nacha?
After
determining the viability of Phixius as a solution to problems surrounding the
exchange of payment-related information, Nacha did consider whether it was best
suited to develop and govern such a platform.
The feedback
Nacha received from the industry was a resounding yes. Besides serving as the
steward of the ACH Network and being responsible for writing its rules, Nacha also
has decades of experience successfully navigating broader payments issues.
Nacha regularly convenes diverse organizations to enhance
and enable electronic payments and financial data exchange within the U.S. and
around the globe. Through the development of rules, standards, governance,
education, advocacy and thought leadership, Nacha works with industry
stakeholders to advance the modern ACH Network and drive innovation by pursuing
new ways to connect people, businesses and payments.
“Nacha
also has been heavily involved in industry-wide API standardization efforts
with organizations around the globe, including those in Europe and in Asia
Pacific and with support from the industry launched Afinis, a membership
organization whose goal is to further API standardization in the U.S. and
participate in global collaboration.” explained Throckmorton.
Afinis is a membership organization with the
singular goal of creating API standard products. For the past two years, Afinis
has been successfully working with the industry to develop and test APIs and
understand what steps are needed for their widespread adoption.
Throckmorton
put it simply: “We have brought the industry together many, many times.” With
Phixius, Nacha is planning on bringing the industry together yet again to
modernize and provide much needed interoperability for payment information
exchange.”
The post With Phixius, Nacha Sets Its Sights on Modernizing and Streamlining the Payments Process appeared first on PaymentsJournal.
View all episodes
By The PaymentsJournal PodcastPayments are
humming across a variety of rails to countless businesses and consumers at any
given moment in the U.S. With so many available payment methods, end users, and
use cases, the payments landscape can be a tangled web of rules and
regulations.
It also can be a
challenge for industry stakeholders to navigate the often complicated payments
world, prompting calls for a simplified and automated process for exchanging
payment-related information. Financial institutions of all sizes and
specialties, as well as payment processors, emerging fintechs, and many others would
benefit from such a process.
With a large
cross-section of the payments world in need of a solution, Nacha has responded with
Phixius,
an online platform that brings together technology, rules, and participants to
streamline and modernize how payment information is exchanged. Nacha plans to
make Phixius available to early adopter organizations in May 2020.
To learn more
about Phixius, PaymentsJournal sat down with George Throckmorton, Nacha’s managing
director of Strategic Initiatives & Network Development.
During the
conversation, Throckmorton spoke about the current issues with exchanging
payment information, how Phixius addresses these pain points, and why Nacha is
well positioned to lead these modernization efforts.
A solution to a problem 10 years in the
making
The payments
industry has contended with an inefficient means of exchanging payment-related
information for at least a decade. Yet, the problems do not lie in “making” the
payments.
“It’s not just about
the routing of payments. I think that’s a misconception,” said Throckmorton. “When
we talk about payment-related information, it’s about the authenticity and
richness of that information.” Bundled into the authenticity of the data is a
range of important aspects of making a payment, including invoicing, compliance
data, and payment remittance.
One central
issue connecting all of these aspects is a lack of automation. “When payment
information is exchanged today, it’s very manually intensive,” said
Throckmorton. Companies often rely on phone calls, emails, and even the U.S.
Postal Service to exchange the relevant information. These methods are slow, prone
to human error, and costly.
The lack of
standardization is another problem that organizations encounter while
attempting to exchange payment information. “How I get that information, the
formatting, and which channel it comes in also add complexity to the process,”
explained Throckmorton.
A related issue
is also the lack of interoperability. Over the past decade, different players
in the industry have set up proprietary directories that are very effective in
supporting the exchange of payment-related data. However, these directories
often do not connect with each other.
“So if I want
to exchange information with others that are not in my particular network or
solution, that’s where it becomes more difficult,” said Throckmorton. Small to
medium-sized organizations are particularly affected by interoperability issues
because they often can’t participate in multiple networks or solutions.
The last issue
identified by Throckmorton was fraud protection. Ensuring that the information
is reliable and accurate is of crucial importance for all of the parties to a
transaction. One common fraud vector is to send a business a request to change
information to later defraud the business. To validate that the request is
indeed authentic, companies often rely on manual checks, such as a phone call or
email, to verify the user’s identity.
Phixius solves pain points by utilizing
emerging technologies, rules, and industry participants
After surveying
all of these problems, Nacha began developing a solution. The company hired
technology partner Ernst & Young LLP (EY) to help develop a product that could
be brought to market. In 2019, Nacha developed and demonstrated a proof of
concept to the industry, and after reviewing and incorporating industry
feedback, Nacha developed Phixius.
“It’s a
platform for the secure exchange of payment-related information,” said
Throckmorton.
He stressed
that Phixius is not a directory. Instead it is platform to enable
interoperability that utilizes emerging technologies – including distributed
ledger, RESTful APIs, and cloud-based environments – to allow its users to more
easily and securely exchange information without centralizing data.
Phixius also
supports real-time alerts and messaging, allowing payment information to be
securely changed. For example, a
business can change payment instructions and every organization that has
previously received information will immediately be notified of the change, said
Throckmorton, noting this reduces fraud such as business email compromise.
“There is no
directory or database in the sky that everyone is going to, and creating risk,”
said Throckmorton.
Phixius also
supports real-time alerts and messaging, allowing payment information to be
securely changed when needed. For example, “people can change bank accounts and
they can change their preferences on what they want for remittance,” said
Throckmorton, noting that these changes can occur in real time.
Underlying
Phixius’ effectiveness is a set of participant rules. “We all have to agree
that we’re going to act the same way, we understand the transactions we’re
going to exchange, and what those mean,” explained Throckmorton. To this end,
Nacha developed and now oversees a set of operating rules that govern the
platform, covering issues ranging from liabilities to warranties. These rules
provide confidence and certainty to everyone connected to the platform.
The last aspect
of Phixius worth noting is its network of participants. Social media platforms
become more effective when more people are a part of the network, and Phixius
is no exception.
However, the
platform is designed such that only financial institutions and service
providers are directly connected. In turn, these businesses provide products
and services to their clients, meaning that Phixius “requires a smaller number
of endpoints to create value for all the businesses,” noted Throckmorton.
Why Nacha?
After
determining the viability of Phixius as a solution to problems surrounding the
exchange of payment-related information, Nacha did consider whether it was best
suited to develop and govern such a platform.
The feedback
Nacha received from the industry was a resounding yes. Besides serving as the
steward of the ACH Network and being responsible for writing its rules, Nacha also
has decades of experience successfully navigating broader payments issues.
Nacha regularly convenes diverse organizations to enhance
and enable electronic payments and financial data exchange within the U.S. and
around the globe. Through the development of rules, standards, governance,
education, advocacy and thought leadership, Nacha works with industry
stakeholders to advance the modern ACH Network and drive innovation by pursuing
new ways to connect people, businesses and payments.
“Nacha
also has been heavily involved in industry-wide API standardization efforts
with organizations around the globe, including those in Europe and in Asia
Pacific and with support from the industry launched Afinis, a membership
organization whose goal is to further API standardization in the U.S. and
participate in global collaboration.” explained Throckmorton.
Afinis is a membership organization with the
singular goal of creating API standard products. For the past two years, Afinis
has been successfully working with the industry to develop and test APIs and
understand what steps are needed for their widespread adoption.
Throckmorton
put it simply: “We have brought the industry together many, many times.” With
Phixius, Nacha is planning on bringing the industry together yet again to
modernize and provide much needed interoperability for payment information
exchange.”
The post With Phixius, Nacha Sets Its Sights on Modernizing and Streamlining the Payments Process appeared first on PaymentsJournal.