International ACH Transactions: United States Goes Global

Boston, MA, July 28, 2008 – A new report from Aite Group, LLC provides insight into the challenges of implementing international ACH transaction (IAT), NACHA's latest standard entry class code for the U.S. automated clearing house (ACH) network. The report outlines the expected benefits of IAT, along with the level of financial institution and vendor-readiness for it. The report also looks into the size and cost of the effort needed from financial institutions.

On March 20, 2009, NACHA is introducing the international ACH transaction as the latest standard entry class code. IAT will replace the existing cross-border ACH SEC codes (consumer cross-border payment or PBR, and non-consumer cross-border payment or CBR), and comes in direct response to OFAC and anti-money laundering concerns associated with those codes. Unlike the prior codes, IAT will eliminate the need for separate batches of international payments from domestic payments and reduce exception processing and its associated compliance risks. Aite Group interviewed executives at 24 banks, one credit union, four leading ACH system providers, and the two ACH operators in order to gauge preparedness for IAT. While most respondents are confident of their readiness, 24% worry they may not be able to process IATs by NACHA's deadline.

"While IAT is costly and time-consuming for all participants in the ACH network, it will actually prove beneficial to all parties affected," says Nancy Atkinson, senior analyst with Aite Group and co-author of this report. "The efficiency of the ACH system is based on its batch processing model, and if screening of every transaction were mandated by OFAC, the cost of ACH processing would skyrocket. So, while many ACH participants are feeling harried about making the changes for IAT, the alternative would be much worse."

This 48-page Impact Report contains 35 figures. Clients of Aite Group's Wholesale and Retail Banking services can download the report.