Schools And State Agencies Eye NACHA’s Online Payment System

Secure Vault Payments, the online payment system that NACHA has been piloting since last spring, is catching on as a bill-payment alternative among colleges and state agencies, says Kendall Myles, the executive who is heading up SVP merchant recruitment for NACHA, the regulatory body for the automated clearing house network. “We've really hit our stride in bill pay,” says Myles. “That's where we'll focus a lot of our attention in '09.” NACHA began seeing interest from universities and colleges last summer, signing the University of Georgia, Georgia Tech, Columbus State University, all in Georgia, as well as the University of North Carolina (Digital Transactions News, Aug. 30). Now, says Myles, more schools are lining up to use SVP to collect tuition. He says “significant interest” has been expressed by schools in California, Colorado, Maryland, and Wisconsin representing approximately 100 campuses, without giving details. He adds he's had “preliminary interest” from schools in Nevada. At the same time, state governments are showing signs of signing up, as well, Myles says. “We'll look to have a significant rollout in '09 [among states],” he says. Myles says he can't name any yet, but states, too, want to use SVP to collect fees online. “It's the same value proposition as for universities,” he says. To smooth the way with state governments, Myles has struck a deal for SVP to be integrated with software from NIC Inc., an Olathe, Kan.-based vendor of Web tools to government organizations. This approach models the one Myles took with colleges, where SVP has been woven into solutions from TouchNet Information Systems Inc., a Lenaxa, Kan.-based provider of commerce-management systems for campuses. With SVP, a consumer who chooses this option to pay at checkout is redirected to a log-in page for her online-banking program. After she authenticates herself, she is presented with a payment page summarizing the details of her purchase or bill payment. If she authorizes the transaction, she is directed back to the merchant's site and the switch instructs the merchant that it has good funds and can ship merchandise. The switch is operated by Denver-based eWise Systems USA Inc., a unit of an Australian software company. A founding investor in Mentor, Ohio-based payments-software vendor CardinalCommerce Corp. and formerly one of its executives, Myles signed on as a senior vice president with eWise 13 months ago and works full time on the SVP program. The program levies an interchange rate of 1.35% on merchant payments and a flat fee of 50 cents on bill payments, payable by acquirers to authorizing banks. Government entities pay 40 cents. In addition, the program collects a switch fee from both sponsoring and authorizing banks, with a cap of 6 cents to each. Because of the program's bank-sponsored authentication of consumers, SVP offers merchants guaranteed funds and real-time authorization, features not available with other ACH payments. Myles says the economics of SVP appeals to schools and state agencies looking for a way to cut payment costs. Convenience fees, which many schools and agencies put in place to cover the costs of card acceptance, have created friction with some users. Meanwhile, electronic checks through the ACH, which some schools have turned to, create problems because schools can't tell at the time of payment whether the transaction account has sufficient funds. Tracking down cases of non-sufficient funds, collection costs, and costs related to removing students from classrooms when classes have already started have driven up the average cost of e-checks, Myles says. Signing up both universities and state agencies could help SVP recruit more authenticating banks. Myles says colleges, with their hefty endowment funds on deposit, can influence their banks to become part of the SVP network. Currently, Synovus Financial Corp., a holding company for 39 banks based in Columbus, Ga., and Gardiner-based Savings Bank of Maine are live on the system. “We have to be careful not to bring on too many merchants before we have bank coverage,” says Myles. About 30 merchants now participate in the SVP pilot, which is set to run until next fall. Transaction volume so far is “small,” Myles says, though the largest merchant to date will go live by the end of the year when Apple Vacations Inc. starts flowing payments. Another merchant, Backgroundchecks.com, will also come on stream by year's end, Myles says.