The 2009 AFP Annual Conference was held in San Francisco this year from October 4-7, and was a more subdued affair than last year, as you might expect given the state of the economy.  There were fewer attendees (4,000, according to AFP), and fewer major announcements.  In fact, the major topic of discussion, as far as payments was concerned, was business-to-business (B2B) electronic payments, one of those opportunities that, like micropayments and mobile payments, seems like it should be huge but never seems to quite get off the ground.

The well-known advantage of checks over any alternative is the inclusion of the remittance advice with the mailed check, facilitating reconciliation with the invoice. 

There are two main approaches being followed to bring this capability to the electronic world.  The most direct one is to simply attach remittance data to electronic payment instructions, already supported by the ACH system, and coming to Fedwire and CHIPS next year.  The ACH version has not had much adoption so far, and one banker from a top 5 institution was worried about investing in the Fed initiative with what he considered inadequate support from the industry.  Further complicating matters is resistance from Europe, where the new wire systems cannot support the amount of remittance data called for by the proposed standard.

The second approach is to send the remittance data through a separate network, as is done by JPMorgan Chase's Order-to-Pay (previously Xign), American Express' S2S, BNY Mellon's SourceNet, US Bank/Visa's Syncada/PowerTrack and Bank of America/Bottomline Technologies' PayMode.  I am more optimistic about this strategy, although it has not so far had a noticeable effect on either ACH or check volumes.  Bank of America's decision to hand over PayMode to Bottomline was at least partially driven by a failure to meet growth targets, and from what I have heard, SourceNet and Order-to-Pay have also had difficulty meeting their objectives.  Perhaps ownership by a single financial institution discourages other institutions and their customers from participating; this may have been part of the thinking at Bank of America.

Besides the remittance data issue, another explanation for the resilience of checks is that they are deeply embedded in corporate accounts payable processes, and the only way to loosen their grip is to get the corporates to change their A/P systems.  SunGard thinks they have the answer with their new EcoSystem Communication Service, another third-party network that connects corporates directly with one another and takes advantage of SunGard's large market footprint.  I interpreted this announcement as the corporates making good on their threat at last year's Sibos that if the banks didn't come up with a solution, they would.  While banks would be allowed to offer their services over the EcoSystem, it would be on a competitive basis, which is exactly what banks worried would happen with SWIFT's SCORE initiative.  Interestingly, SWIFT has named SunGard a "preferred partner", even though their initiative would seem to compete directly with SWIFT's own plans to connect corporates to each other.  This suggests to me that SWIFT has begun to see corporate access as an insurance policy against any attempts by banks to bypass SWIFT through direct connections; if all the corporates are using the EcoSystem or SWIFT to connect to each other, the banks will have to use it as well.  This is a very bold and ambitious move by SunGard, and I would vote for it as the most significant announcement of the show.  However, it will be tough to pull off; SunGard is going up against a whole range of established competitors, in what has historically been a difficult market.  Perhaps EcoSystem, as a bank-independent, corporate-focused entity, will have greater traction than past efforts.