The Federal Reserve Bank of San Francisco is involved in numerous
innovative initiatives to streamline the payments process. Many of these
efforts leverage the existing Automated Clearing House (ACH) system in
Begun early in the year as a project to develop a prototype electronic
bill presentment and payment service, the Electronic Billing Information
Delivery Service (EBIDS) would expand the use of the ACH, using it to
route and deliver billing and payment information to billers and their
customers. The project involves enhancing the ACH network to deliver billing
information and payment instructions to banks that can then post this
information on their web sites as part of the bill payment services they
offer to their customers. Although still in the concept stage, EBIDS will
potentially add value to an already tried and trusted payments mechanism,
and the project is now a joint venture with several other Reserve Banks.
Treasury Point of Sale
Treasury Point of Sale (TPOS) is an initiative begun in the Fall of
1999 to convert checks that certain government agencies receive at the
point of sale to ACH payments. This project, also in pilot phase, could
eventually involve as many as 50 government agencies. During 2000, the
Veterans' Administration Canteen Service, the Patent and Trademark Office,
the Bureau of Engraving and Printing, and the Government Services Administration
(GSA) began to participate in the pilot.
Two external companies are involved in the process: RDM Corporation,
which supplies the scanner necessary to read check data, and eFunds Corporation,
which provides the back-end processing required to create the ACH file
that is submitted to the Federal Reserve. A TPOS transaction works as
follows: A purchaser writes a check to a participating agency for services
received. Instead of the normal check transaction, however, the purchaser
signs an agreement acknowledging the funds will be collected electronically
via the ACH. (Once the transaction is complete, the check is stamped "void"
and returned to the customer.) The check is scanned through the RDM scanner,
with data transmitted to RDM Corporation and processed onward to eFunds,
where the actual ACH debit file is created. The file is then processed
through the ACH, and the appropriate accounts are debited and credited.
Processing cost savings are potentially significant. Various studies
show that it costs approximately twice as much to process a check as it
does to process an ACH transaction. The most significant savings involve
the elimination of certain paper, transportation, and check encoding costs.
Other advantages include the ability to retrieve an image of the check
later on, should the agency have need, as well as an ability to decline
checks from customers who have a documented history of writing checks
with insufficient funds.
In 2000, the Bank launched the Simplified Giving Program as a pilot.
This program encourages nonprofit organizations to offer direct payment
as a method of collecting donations. Direct payment enables a nonprofit's
donors to make contributions directly from their bank accounts to the
nonprofit on a recurring basis. Anticipated benefits of this program are
that the convenience of the payment method generally encourages more generous
donations, and people who might otherwise donate on a one-time basis become
sustained donors. Use of the program also will make the nonprofit's cash
flow more predictable.
Direct Payment Joint Promotion
Begun as a collaboration between various Federal Reserve Banks, ACH
Associations, financial institutions, and billers, the Direct Payment
Joint Promotion initiative encourages direct, automated payment of bills
from customer to vendor or service provider.
While our District's project operates only in Northern California at
present, each year new billers have been added; there are now 18. In 2000,
web technology was successfully utilized to allow customers to enroll
on line at www.directpaymentplan.com.
first such project began 12 years ago in Hawaii, and in 1995, Pacific
Gas and Electric (PG&E) Company and Bank of America expressed interest
in starting a similar project in California. Initially, four billers participated:
PG&E, Pacific Bell, the East Bay Municipal Utility District, and Great
Oaks Water Company of San Jose.
Of the billers currently involved in the project, only three had existing
direct payment programs. In the first year of operation, PG&E saw
sign-ups 26 percent higher than from its own program. Efficiencies in
enrollment processing, moreover, are achieved with volume.
significant advantage for customers who participate in the direct payment
service is that they know exactly on which day the payment will leave
their checking account, which helps them predict their cash flows better.
Likewise, the partic-ipating billers enjoy greater predictability in the
timing of their cash flows than they do when customers mail checks. In
addition, the cost of processing ACH payments is much lower than that
of check payments.
There are plans to expand the program throughout the Twelfth District,
and an effort to develop a standardized, national program is being led
by the Federal Reserve Bank of Cleveland.