Behind The Clearing House’s Effort to Bring Tokenization to Its Real Time And ACH Services

Against a background of emerging real-time payments and steady growth in automated clearing house transactions, The Clearing House Payments Co. LLC is working to mask those transfers with a technology the payment card business has used for years—tokenization. The job is enormous. “We’re just starting—it’s going to take time,” says Jeff Williams, a senior vice president at New York City-based TCH.

The new effort, which has been in the works for some time but was officially announced Monday, is aimed at replacing deposit-account and routing numbers with strings of digits that would be useless if intercepted by thieves. TCH is starting with its Real Time Payments network and will have the capability in place for its ACH system by June, Williams says. Pittsburgh-based PNC Bank, a TCH owner institution that serves 9 million customers, is one of the first financial-institutions to use the service, known as Secure Token Exchange.

But before the official announcement of the service, TCH had been developing its technology and strategy, first internally and then through limited real-world tests. “We launched it quietly in February,” he tells Digital Transactions News. “We’re working on small pilots right now.” The urgency is especially clear with real-time transfers, which TCH began offering in 2017. “We’ve got to make sure it’s flawless,” he says, “before we start getting [big] volume on our RTP network.”

The company, which is owned by 24 financial institutions—including giants like Chase and BofA—has partnered with data aggregators as well to extend tokenization to the rapidly growing open-banking industry. Akoya LLC has signed on, along with others Williams can’t yet name. “Data aggregators are distributing [their services] to fintechs. It’s so important for those endpoints to be tokenized,” he says.

To help the new tokenization service proliferate among financial institutions and other users, TCH is not charging fees. Nor is the service mandatory for TCH users. But “we’re not preventing it if banks want to monetize it,” says Williams.

He stresses the need for tokenization as security for data in motion. “There are vaults of data out there. [Banks] have that data sitting there, housed somewhere. It’s still at risk. We think encryption plus tokenization is the right way to go.”

As things stand, the RTP network reaches 61% of U.S. demand-deposit accounts, according to Williams, with 240 financial-institution users. EPN, the private-sector ACH network, processes some 70 million transactions per day. But despite the progress the new service has made so far, he wants to guard against outsized expectations. “We’re on first base,” he says. “We want to get a few more hits.”