July 30, 2021

Meaningful Modernization: Changes to Keep the ACH Network Thriving


Michael W. Kahn

Michael W. Kahn


One of the many things the ACH Network prides itself on is being able to change with the times and remain a vital part of the nation’s payments infrastructure. A prime example of that flexibility is the adoption of a new series of Nacha Operating Rules known collectively as Meaningful Modernization.

“There’s almost nothing about today’s modern ACH Network that anyone from the 70s would recognize. The ACH Network and its Rules framework, and the technology and business model framework, has really kept pace over the years and is poised to continue fairly robust growth and adoption of new use cases well into the future,” said Mike Herd, Nacha Senior Vice President, ACH Network Administration. 

For Meaningful Modernization, “We are updating several areas of the Nacha Rules to account for and accommodate new technologies and channels and processes in the ways that businesses and other organizations interact with consumers to conduct commerce and initiate payments,” Herd recently told Nacha’s “Payments SmartCast” podcast

“Nacha has been very focused for a while on the end user experience with ACH, and these are some of the areas that have been identified by our members and others in the industry that would be fruitful for modernization.”

When Meaningful Modernization becomes effective Sept. 17, it will offer new frameworks for how businesses can authorize and initiate consumer ACH payments that Herd said are often “part of, or embedded into, new types of technology channels or services.” 

One is a standing authorization, an enrollment allowing for future payments as part of a service or product. These would be occasional—an in-app purchase, for example—rather than recurring, like a mortgage. 

The second is an oral authorization, which under the new Rules becomes separate from a telephone call. “There are lots of ways now that consumers will interact with service providers and businesses using voice technologies,” Herd said. Telling Siri or Alexa to pay a bill is a prime example. 

Nacha has heard from many in the payments community, particularly Originators, that providing proof of authorization for a payment can be a burdensome, frustrating process. Another change will allow Originators to accept the return of a payment, instead of being required to provide the proof of authorization.

Herd noted that many of the Meaningful Modernization changes are optional, rather than mandatory, for ACH Network participants to use. But he expects many to see the value, much as they did with another sea change the ACH Network has experienced.

“When the ACH system was created the internet didn’t exist. But internet-initiated payments is one of our largest categories of ACH payment volume now.”

Listen to the full Meaningful Modernization podcast with Mike Herd, as well as other episodes of Nacha’s Payments SmartCast.

Learn more about Meaningful Modernization and watch the video in the Rules section of Nacha.org.