ACH Should Run On XLM!

The ACH, or Automatic Clearing House, is a key electronic network for financial transactions in the United States. “ACH is a way to move money between banks without using paper checks, wire transfers, credit card networks, or cash.” In the early 1970s the Federal Reserve realized the volume of paper checks to transfer and pay bills was exceeding the ability for computer systems to process and sort efficiently. In 1974 regional ACH associations formed NACHA to coordinate the creation of rules to facilitate the nationwide clearing of payments. Eventually in 1994 the FED went as far as mandating that all ACH payment input and outputs files would have to be deposited electronically…in other words all institutions dealing with the FED directly were required to an electronic link to mainframe computers to participate.

Today, however, it is the ACH that is unable to keep pace with the volume….and Stellar is the solution.

Despite all the fancy apps and websites it is frustratingly slow to transfer and access your money. As crypto expands across the market the slowness of ACH blares in comparison. Anyone that has tried to add or withdraw funds from a crypto exchange experiences this daily. I’ve always believed that the power of Stellar is beyond that of just a token and to me here’s an area where the network can really shine.

Millions of Americans are living paycheck to paycheck. As I write this it was just reported that that the third largest bank in the country, Wells Fargo, was shuttering personal lines of credits for their clients. This will impact people in two ways:

1. it removes the available capital that many depended on to cover monthly expenses
2. it will further limit cash flow due to hits that will occur to many on their credit score, as shuttering accounts will immediately increase their Credit Rate Ratios and negatively affect credit scores thus increasing monthly obligations by the result of higher interest on debt

The current ACH system creates a strain on the everyday citizen. For those at the bottom, the paycheck is always coming a day too late. I remember those days all too well. Your bill is due today however ACH causes that paycheck to take 3–5 days (standard ACH debit process) to clear which sets off a domino effect. This has forced many into shady paycheck advance locations where they take an even harder hit just so that they can get access to those funds faster. Another impact that further crushes the American public are late fees. I have hard working families, for instance, that sends in their rent electronically on the 1st of the month along with other core bills. Even though I may see the credit appear in my system its still pending on the back end. Since execution time for settlement is not consistent its not uncommon for people to glance at their accounts and assume their obligations have been settled. When you add on the delay of everyday purchases through debit cards an ugly ripple effect occurs as, for example, their supermarket purchase that they made for diapers hits right before my bank receives their rent.

The trails then looks like this:

I’m automatically charged a fee from my bank for accepting the tenant’s bad check-they are charged my fee through my system for not only causing us to be charged a penalty but also for now being late on rent-their bank charges them a fee for writing an insufficient check-they still owe rent but now with less money then what they started with.

I can already hear some out there saying that “its there fault” for not balancing their “check book” but why should they have to add that on top of the struggles facing us when there is now a viable solution. Instant settlement is possible today with the Stellar network and with the design of the Stellar Consensus Protocol, the ability to combine the advantages of a private network with that of an open and decentralized one is possible. Just listen to the Stellar Development Foundation’s COO Jason Chlipala from an interview that aired earlier on the Stellar Global podcast:

I urge Congress to seriously examine the positive impacts that Blockchain, and in particular the Stellar Blockchain, can have on everyday citizens. By following through with regulatory clarity and giving Stellar the official stamp of approval it will allow the full allotment of resources to enter into R&D to explore and create the best path of implementation. This will not only help people access money to pay expenses immediately during payroll but also allow small business to have immediate settlement as well, which will help with job creation; another crucial benefit of Stellar that we will discuss another day.