Each month, NACS Magazine publishes the “Bits & Bytes” column, addressing the technology issues that affect the convenience and fuel retailing industry. This month’s column by Conexxus Executive Director Gray Taylor discusses the past, present and future of ACH payments. For more on technology topics, visit Conexxus.org.

As a market maker on the Chicago Board of Options in the early 1980s, I was tasked with providing a liquid market for options trading on listed stocks. I would stand in a trading pit (long since replaced by computers) and buy and sell hundreds of contracts in hopes of making a small amount of profit.

At the end of the day, my trades — and millions of other trades — would “clear” (matched and paid as verification of good funds by all participants) overnight for fractions of pennies per trade so the market would start the next day with all accounts up to date. The exchanges were performing “same day” settlement because there were economic risk advantages to doing this.

Also in the early 1980s, the Federal Reserve introduced Automated Clearing House (ACH) functionality, a perceived extension to its charter, to clear checks at par. However, under ACH, interbank “checks” would be electronic, not paper-based. Like the exchanges, the Fed saw great risk and inefficiency relying on a large, growing payment system that used paper to move from a deposit bank to an issuing bank — a point driven home following September 11 when planes couldn’t fly paper checks.

The Fed’s promotion of ACH, including “competition” with private clearing houses to increase efficiency, has helped eliminate checks as a main method of moving funds. But in this day of instant access to information, the ACH system has become inefficient, as it still takes two to three business days for a payment to clear.

Consider this: Our methods of settling payments have not changed materially in 35 years! ACH has become cheaper, but definitely not more efficient.

This year the Federal Reserve Board of Governors announced the Faster Payments Taskforce, a group of more than 200 stakeholders tasked with forwarding the opportunities outlined in its January 2015 white paper “Strategies for Improving the U.S. Payment System.” Basically, the Fed recognizes that the United States, to the detriment of its competitiveness, has relied on the ACH system and now severely lags behind the rest of the world in the clearance of interbank transfers.

Conexxus has been selected to participate in the Fed’s newly formed taskforce as a representative for retailers — a key stakeholder in the payments system. Over the next 18 months, Conexxus – with the support of NACS – will be immersed in recasting the U.S. payment system, pushing for competitive, timely and cost-effective payments that benefit all payment system stakeholders.

Conexxus is more than just standards — we help shape the way consumers pay for things tomorrow. Stay tuned for more information about our participation in the Fed’s Faster Payments Taskforce.