Payment Processing Industry Market Analysis 

Although many new payment schemes exist today with many more on the horizon, the vast majority of these systems continue to be based upon the two fundamental payment methods, credit and debit.

Successful solutions such as PayPal and more recently BillMeLater offer a slight twist to the traditional payment mechanism of credit cards.  PayPal for example, whose primary merchant customers are small retailers who typically are not large enough to qualify for their own merchant account at a bank, offer consumer payment options consisting of either credit cards or bank debit through the ACH network.

All other e-check (online electronic check) solutions are based upon the ACH (automated clearing house) system.  ACH transactions are bank electronic funds transfers whereby the consumer’s bank account is debited and the recipients account is credited. ACH transactions work reasonably well in most instances, however the system does suffer from some shortcomings which have impacted adoption.

ACH transactions are governed by NACHA, (the National Automated Clearing House Association), who imposes a substantial number of rules and regulations upon the transactions and their users. NACHA issues these operating rules in a manual the size of a major metropolitan phone book, updating and changing rules frequently making it difficult, if not near impossible, to stay compliant.

ACH transactions take several days to clear through the system. During the clearing period the recipient has no way to determine if the transaction is even going clear or if it will result in an administrative return. ACH has more than 60 reasons why a transaction can fail. Many times it is because the consumer’s bank has chosen not to participate in ACH, or hasn’t performed the correct system integration.

Many online merchants are dissatisfied with credit card and ACH solutions, and many online industries such as travel and brokerage have no check solution at all.