The board of directors of Nacha has approved moving to the next phase of Project Action (ACH Credit Transactions Initiated Online), to build and test a bank-centric Internet payment system. Under this phase, Nacha plans to form a limited liability corporation, recruit financial institution owners of the corporation, issue a request for proposals, build the Action infrastructure, and conduct live transactions.

"The financial institution members of Project Action determined that it makes sense to pursue a proof-of-concept phase," says Steve Ellis, executive vice president of Wells Fargo, who chaired Action's financial institutions committee.

He says the members of Project Action have completed a business case that estimates new banking industry revenue of $1 billion in its 5th year of operation from Internet payment and authentication products and services.

Charles Bretz, SVP of Compass Bank, who chaired Phase 1 of the project, comments: "The Action business case shows that financial institutions can make money by providing value-added Internet-based payment and authentication services to their deposit customers."

Mark Havlik, a senior vice president at Wachovia, says privacy and security are the primary concerns of consumers and businesses that currently do not conduct transactions on the Internet. He says: "Project Action could provide a banking-industry solution for payment privacy and customer authentication on the Internet."

A key feature of Action is that a consumer or a business would initiate a payment on the Internet via its own financial institution, instead of providing financial information to a merchant or biller and authorising a debit to its account. This is also known as a "credit-push" payment model.

Financial institutions would expcetd to gain new revenue by providing Internet merchants and billers with customer authentication and real-time payment guarantees.

James Van Dyke, principal and founder of Javelin Strategy and Research, states: "Financial institutions already have the ability to authenticate their customers online, and should be considered a viable alternative to the authentication solutions being proposed by technology companies."