NACHA Announces Fees for Secure Vault Payments
NACHA has announced the fee structure for its online payments pilot, Secure Vault Payments (SVP). According to NACHA, "the pilot, scheduled to go live the first quarter of 2008, will enable consumers to initiate private and secure payments for purchases and bill payments through their financial institutions' online banking platforms. During the pilot, participating financial institutions will authenticate consumers and provide real-time payment authorizations for ACH Network transactions to the participating online businesses."
According to our calculations, on a $50 purchase, the fees would be: 1) an authorization fee of $0.675 paid from the merchant's bank to the consumer's bank, a $0.06 switch fee paid by the merchant's bank, another $0.06 switch fee paid by the consumer's bank, a $0.01 network fee paid to NACHA by the merchant's bank and another $0.01 network fee paid to NACHA by the consumer's bank. The total of all the fees here - not including any mark-up by the merchant's bank to the merchant - would be $0.815 or about 1.63% of the purchase amount. Read on for the details of NACHA's announcement.
Update - September 18, 2007: We spoke with NACHA this morning about our calculations above. While the total fees collected from all parties involved on a $50 transaction are the $0.815 shown above, the fees charged to merchants for a Secure Vault Payments transaction would be the authorization fee of $0.675 paid by the merchant's bank, plus the $0.06 switch fee paid by the merchant's bank, plus the $0.01 network fee to NACHA paid by the merchant's bank. Those merchant-side fees total $0.745 on a $50 purchase or about 1.49% of the purchase amount. The merchant's bank will, of course, need to charge additional processing fees to the merchant for providing the Secure Vault Payments service which would be over and above those "wholesale" fees.
"The fee structure and fee level will be attractive to both the financial institutions that offer this payment option to business and consumer customers as well as the online businesses that add SVP as a payment option," said Elliott C. McEntee, president and CEO of NACHA.
NACHA consulted with industry, economic and legal experts to develop an appropriate fee structure and fee levels for the pilot. Accordingly, NACHA determined those fees that would generate maximum incentives for all entities to participate in the pilot, while remaining competitive in the marketplace.
Based on its research NACHA has established the following SVP fees:
Authorization Fees: An authorization fee will be paid from the business' sponsoring (receiving) financial institution to the authorizing (originating) financial institution in each SVP transaction. Authorization fees include:
- Consumer purchases: The greater of 10 cents or 1.35% of the transaction value.
- Consumer bill payments: 50 cents per transaction (flat fee).
- Government transactions: 40 cents per transaction (flat fee).
Switch Fees - eWise Systems, Inc. will provide switching service infrastructure for SVP transactions. NACHA has negotiated a cap of 6 cents per transaction for sponsoring financial institutions and 6 cents per transaction for authorizing financial institutions that will be paid to eWise Systems, Inc.
SVP Network Fee - NACHA will collect a fee to support marketing and governing body costs. The sponsoring and authorizing financial institution will each pay 1 cent per SVP transaction.
Pilot fee levels will serve as a five-year cap for early adopters in the SVP Network.
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