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Is same-day ACH inevitable?

By: Marcus Wannemacher, VP, Operations

June 9, 2014

ACH rules have always required originated transactions to carry a settlement date in the future. This process has provided financial institutions the time to assess risk and anticipate funding needs, especially for those that allow businesses to originate transactions. It also provides a buffer for transactions to make their way through the ACH clearinghouses in time to post to consumer accounts by the morning of the effective date, as in the case of payroll deposits. Unfortunately, advances in transferring money have made next-day availability of ACH funds seem slow. In fact, thanks to Check 21, most checks now clear faster than ACH transactions, forcing those of us in the ACH industry to closely consider how ACH can remain a relevant and competitive payment option through a move to same-day settlement.

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Peripheral technology is quickly changing the payments landscape. Non-financial institutions such as PayPal and Popmoney move “guaranteed” funds between users in perceived real time. Consumer expectations have been raised, especially among younger generations, to anticipate real-time money transfers and the ability to transfer funds from person-to-person. As such, these transfers are moving transactions outside of the nation’s financial institution network, along with any associated fees. The only drawback – for now – is that these non-financial institutions are not ubiquitous, meaning that both parties included in a transfer must have accounts at the money transfer company.

Functioning similarly to these real-time payments between non-financial institutions is same-day ACH, which both NACHA and the Federal Reserve Bank support as a path forward for U.S. financial institutions. The ACH network is inexpensive, reliable, and, most importantly, ubiquitous. The ACH network can reach any consumer at any U.S financial institution with a transaction account. In the case of consumer-generated ACH credits (or person to person transfers) the funds would also be guaranteed, since the ODFI would have debited the sending party. There are other practical reasons to support same- day ACH, such as emergency or missed payroll, same-day bill pay service, and improved cash management tools for businesses.

NACHA recently announced their plan proposing a phased approach to same-day ACH. Supported by the Federal Reserve Bank, the plan proposes incremental functionality that would enable same-day ACH credits for items such as payroll, person-to-person (P2P) payments and expedited bill pay. The second and third phases would focus on same-day debits and reducing counter-party risk. NACHA members voted on same-day ACH last year, but the vote failed to reach the super-majority required. It is certain to be introduced for another vote and will, in my opinion, eventually pass if members want ACH to remain a viable payment option. The current opt-in program for same-day ACH at the Federal Reserve Bank is laudable, but lacks the ubiquity required for success. And, the only way to achieve that is by NACHA rule changes.

So start thinking about how same day ACH can benefit your members and your credit union. And, provide feedback on NACHA’s current plan. One thing your credit union can do now to prepare for this change is to pick up your incoming ACH files throughout the day. Most of Corporate One’s credit union users, as well as many community banks, only pick up once in the morning. When same-day ACH becomes a reality it will be part of the NACHA rule changes that all financial institutions pick up and process incoming files multiple times during the business day. Make sure your core system data processor is preparing for this change and get to the front of the line. Start the habit of picking up multiple files daily. Call our Member Services department to schedule a change to multiple daily pick-ups and get ahead of the curve.