Leonard J. Heckwolf, senior vice president in charge of the Consumer Payment Solutions division at Bank One, was recently appointed chairman of the Board of Directors at NACHA, the Electronic Payments Association. In an interview the will run in the January 2003 issue of BS&T, Heckwolf talks about his roll at NACHA and some of the challenges facing the organization. Here are some excerpts of that conversation.
BS&T: What kind of duties do you see yourself performing as chair?
HECKWOLF: My duties will fall somewhere between the core issues of setting rules around electronic payments that move the system forward and being more of a catalyst for change and quickening of the movements of electronics.
There are core functions that NACHA does around government relations and rules setting and making sure that all the banks are in sync and behaving themselves on risk. But I also think there is a higher focus around leadership on innovation, just trying to get the whole shift toward electronic payments moving forward faster.
BS&T: It's reported that NACHA is going to take a stronger look at risk management. How can the ACH network help in this area?
HECKWOLF: NACHA can provide assistance in two key areas. One is around underwriting. The banks need to clearly understand what the risk on electronic payments is. We need to make sure all the players in the game have very clear underwriting around ACH credits and debits. Many do, but there is still work that needs to be done to understand that risk. I think there will have to be some stronger rules around that.
The second part is on the new applications such as Web payments, where the nature of those transactions means there is going to be some higher level of exposure. The truth is electronics should be better then paper checks, but we have got to put the mechanisms in place to protect ourselves.
BS&T: Another stated goal of NACHA is developing synergies among the various payment networks. Is this a problem right now?
HECKWOLF: There is no value to individual payment mechanisms doing the same thing. It's important that what ACH is really good at--which tends to be focused mostly around check replacement--be leveraged and become the absolute best it can be at that. But you don't need overlap between paper products and electronics products. You don't need overlap between ACH and wire, between ACH and card products. The industry has got to say that in this phase, this solution works, and not have five mechanisms that are all competing and wasting energy on the same space.
BS&T: You were the chair of NACHA's Next Generation task Force. What were the strategic goals that came out of that?
HECKWOLF: In a sentence, I would say that it's putting in place the infrastructure so that when the network hits 25 billion to 30 billion items, it will be as strong as it is today.
BS&T: What will be the next big thing coming up for ACH payments?
HECHWOLF: I think the issues around value-added products--things like accounts receivable check conversion and check truncation. . Both have huge potential to take out the paper check. Related to that, there is a need for other products to make that competitive like a same day ACH settlement around ARC items. These value-added items are what we will focus on.