It has been a year since the Federal Reserve Board finally conceded that it had the edge when it came to pricing on the processing of automated clearinghouse (ACH) transactions. Now it?s time for banks and perhaps alert corporate clients to cash in on savings from the price war and new improved services resulting from the central bank?s mea culpa. How big the bonanza will prove to be is still unclear, but hostilities have definitely broken out. The Fed?s major contender: the Electronic Payments Network (EPN), a unit of the New York Clearing House. According to ACH product managers like Laura Lee Orcutt at Wells Fargo Bank in San Francisco, EPN is trying to corner the market. If we're using the Fed and our competitors are using EPN and getting a lower price, they can afford to underbid us consistently in the marketplace. In percentage terms, the price cuts are huge between 25% and 45% but in real dollar terms, they are measured in mills, not cents. Therefore, the price war means big savings for banks that generate hundreds of millions of ACH transactions but much more modest benefits for most treasury departments that use the ACH less frequently. Only the external delivery of the transactions is affected the equivalent of a postage stamp, explains Marcie Heitema, a senior vice president at J.P. Morgan Chase & Co. in New York.

It is a very small part of what treasurers pay their banks to originate ACH
transactions. They couldn't bargain for two cents less per transaction; they
might be able to get a cut of half a mill, which to most treasury managers i
not that significant.

Riding the Shakeout