Same Day ACH Moving
Payments Faster
Presented by
Adrian Brown, AAP
Source: NACHA.org
The Payments Authority 2015
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Why Is NACHA Proposing Same Day ACH?
The ACH Network processes about 71 million ACH payments • Originators and Receivers of many of these payments would benefit from same‐day processing and faster funds availability
every business day
• Bill payments and invoices due on that day
Same Day ACH addresses needs • Payroll products to better support hourly workers and other payroll needs
• Billers and banks looking to better manage credit risk
of end‐users
• Moving payment‐related remittance information on the same day
Implementation of Same Day ACH would lead to changes • Intra‐day posting and funds availability of credits to DDA systems;
within financial institutions that • Improved risk management and authentication before credits are sent.
could also be utilized for real‐
time payments in the future
Why Is NACHA Proposing Same Day ACH?
Innovation
Faster Payments
Provide near‐real time delivery of payment messages (24/7) and more frequent posting/settlement
‒ to replace costly cash and checks and support P2P, mobile and other emerging payments
Faster
Payments
Remittance
Data
ACH Formats
“Faster Payments” is one of eight attributes of the future ACH Network, according to NACHA’s ACH Blueprint of 2012.
Cross‐Border
Interoperability
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User Enablement
ACH Credit Payments
Routing Data Verification
3
What Was Being Proposed?
Two new same‐day processing windows, at 10:00 a.m. and 3:00 p.m. (EST)
Morning window at 10:00 a.m. ET , with settlement occurring at 12:00 noon. Afternoon window at 3:00 p.m. ET, settlement occurring at 5:00 p.m.
RDFIs would be mandated to receive Same Day ACH payments. RDFIs would make funds available from ACH credits (such as payroll Direct Deposits) to depositors by 5:00 p.m. local time.
1 ‐ Times are estimates; exact schedules and timing would be determined by each Operator. The ACH Operator schedules are not determined by the NACHA Operating Rules, and the inclusion of ACH Operator schedules and other functions in this proposal should not be interpreted as an endorsement by either ACH Operator. What Transactions Would Be Eligible for Same
Day ACH?
Virtually all ACH transactions, including credits and debits, would become eligible for same‐day processing. The only ACH transactions that would be ineligible for same‐day processing would be international transactions (IATs), and large‐dollar transactions over $25,000.
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How Does the Same Day ACH Schedule
Compare to Existing ACH?
Next Day ACH 3:00 AM - ACH Opens
6:00 AM - RDFI receipt files of Next-Day ACH
8:30 AM - Settlement
1
Same Day ACH
(as proposed)
2
6:30 PM - Fedwire closes
2 :0 0 A M
1 :0 0 A M
1 2 :0 0 m id n ig h t
1 1 :0 0 P M
1 0 :0 0 P M
9 :0 0 P M
8 :0 0 P M
7 :0 0 P M
6 :0 0 P M
5 :0 0 P M
4 :0 0 P M
3 :0 0 P M
2 :0 0 P M
1 :0 0 P M
1 2 :0 0 n o o n
1 1 :0 0 A M
1 0 :0 0 A M
9 :0 0 A M
8 :0 0 A M
7 :0 0 A M
6 :0 0 A M
5 :0 0 A M
4 :0 0 A M
3 :0 0 A M
This chart shows the current ACH schedule along with the proposed new Same Day
ACH schedule, creating a total of three daily settlements, as well as other important
timing milestones of an ACH processing day.
2:15 AM - ODFI Deadline for
Next-Day Transactions
10:00 AM - ODFI Deadline for Same Day Window
11:00 AM - RDFI Receipt Files for Same Day Window
12:00 Noon - Settlement for Same-Day Transactions
3:00 PM - ODFI Deadline for Same Day Window
- RDFI Receipt Files for Same Day Window
3 4:00 PM
5:00 PM - Settlement for Same-Day Transactions
All times Eastern Time
RDFI File Receipts Times Are Approximate
A Phased Approach to Implementing New ACH
Network Functionality
To allow the industry to acclimate to a faster processing environment, as well as
to ease the industry’s implementation effort, these new capabilities would
become effective over three phases beginning in September 2016.
Functionality
Transaction Eligibility Phase 1
Sept. 2016
Phase 2
Sept. 2017
Phase 3
March 2018
Credits only
Credits and debits
Credits and debits
New Same Day ACH Processing Windows
10:00 am ET and
3:00 pm ET
10:00 am ET and
3:00 pm ET
10:00 am ET and
3:00 pm ET
New Settlement Time(s)
5:00 pm ET
5:00 pm ET
12:00 noon ET and
5:00 pm ET
ACH Credit Funds Availability
End of RDFI’s processing day
End of RDFI’s processing day
5:00 pm RDFI local time
($25,000 limit; IAT not eligible)
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Other Technical Details as Proposed
Eligibility of Non‐
Monetary ACH Transactions for Same‐Day Processing:
Identification of Same Day Transactions: Same‐day ACH transactions would be identified and processed by using that day’s date in the Effective Entry Date field of the batch of same‐day ACH transactions.
Return Processing:
This proposal would allow returns, whether or not the forward transaction is a same‐day transaction, to be sent and processed through the same‐
day clearing and settlement schedule offered by the ACH Operators.
Under this proposal, these transactions would be eligible for same‐day processing beginning with Phase 1 of implementation.
The Major Use Cases for Same Day ACH Are
Projected to Generate 1.4 Billion Transactions
Over 60% of estimated Same Day ACH volume comes from existing ACH
C2B
• Bill Pay
• eCommerce
• POS check conversion
• Merchant debit
• Collections
C2C
• Person‐to‐Person
• Account‐to‐
Account
SDA Transactions in 2027,
by Source of Transaction
100%
7%
90%
4%
1%
15%
80%
70%
10%
62%
1%
60%
50%
The Payments Authority 2015
30%
20%
Total
Other
Card
Wire
Check
Pay
0%
Cash
10%
ACH
• Payroll
• Insurance, refunds
40%
On-line Banking & Bill
• Multiple uses, such as trading partner payments, due‐date and late invoice payments
B2C
Existing
B2B
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What Are the Overall Results of the CostBenefit Analysis of Same Day ACH?
•
•
ODFIs have the opportunity to independently offer and price new products and services to be delivered via the new, optional same day ACH capability.
RDFI implementation would be mandatory, without certainty of revenue that would enable them to recover the costs that they would incur to enable the ubiquitous Same Day ACH capability, and therefore without a return on their investment.
– RDFIs generally would not able to charge customers for the receipt of same‐day ACH transactions because Receivers generally do not control the speed by which Originations choose to send payments. – Fees charged to Receivers would likely be confusing if they were charged for some ACH transactions, but not at other times for the same type of payment
– Fees charged to Receivers may also suppress the demand for same‐day ACH.
•
The results of the economic research show that, absent a correcting mechanism, an economic imbalance would exist between ODFIs and RDFIs.
– Therefore, this proposal includes a cost recovery mechanism that would enable RDFIs to recover their costs and provide a fair return on their required investments.
– The mechanism contained in this proposal is an interbank fee of paid from the ODFI to the RDFI for each Same Day ACH transaction.
What is the Interbank Fee and Can It Be
Changed?
Proposed Interbank fee is 8.2 cents per same‐day ACH transaction
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Periodic volume reviews will be conducted to determine a potential reduction of the fee amount
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Same Day ACH Request for Comment
214 organizations responded (several submitted both surveys and letters)
181 survey responses
• 141 financial institutions
•
•
•
•
•
•
•
•
•
24% less than $250M assets
28% $250M ‐ $1B assets
36% $1B – $100B assets
12% greater than $100B assets
22 vendors/processors
8 Regional Payments Associations
6 end‐users (including U.S. Treasury)
2 ACH Operators
2 associations representing processors
43 comment letters • 8 corporate/end‐user associations
• 8 financial institutions
• 6 Regional Payments Associations
• 5 financial institution national associations
• 5 financial institution state associations
• 3 end‐users
• 3 vendors/processors
• 2 ACH Operators
• 1 central bank staff
• 1 consumer protection agency
• 1 consumer interest group
New, Ubiquitous Same Day ACH Functionality
Survey responses show strong support for the proposal and for moving forward
Does your organization support the proposed new Same Day ACH clearing windows and settlement times substantially as proposed? 61.3%
Yes, substantially as proposed
30.9%
Yes, with change(s)
7.7%
No
Of those suggesting changes, top 5 changes cited
•
•
•
•
•
35% ‐ Timing of clearing window(s)
28% ‐ Timing of settlement
9% ‐ Need same‐day transaction identifier
5% ‐ Different transaction dollar limit
4% ‐ Implementation date(s)
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New, Ubiquitous Same Day ACH Functionality
Do you agree that ubiquity is required in order to provide value to ACH Network end‐users (i.e., that all RDFIs should be required to receive Same Day ACH transactions)?
95.6%
4.4%
Yes
No
Do you agree that virtually all ACH payments, including both debits and credits, should be eligible for same‐day processing?
73.3%
Yes
18.9%
Yes, but with change(s).
7.8%
No
New, Ubiquitous Same Day ACH Functionality
Do you agree that all RDFIs should be mandated to provide faster funds availability for same‐day ACH credits? 66.1%
Yes
25.0%
Yes, but with change(s).
8.9%
No
Do you agree with the three implementation phases and their effective dates substantially as proposed? 64.1%
Yes
22.7%
Yes, but with change(s).
13.3%
No
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Same Day ACH Use Cases
Would your organization use or offer Same Day ACH for any of the 10 major uses cases identified in the proposal? 87.1%
Yes
12.9%
No
Top 5 uses
•
•
•
•
•
87% ‐ Payroll
72% ‐ Business‐to‐business
59% ‐ Account‐to‐account transfers
57% ‐ Person‐to‐person payments
53% ‐ Bill payments
Technical Topics
Do you agree with the proposal to use the Effective Entry Date field to identify same‐day ACH transactions? 52.6%
Yes
47.4%
No
Do you agree that non‐monetary transactions would be eligible for same‐
day processing, beginning with the Phase 1?
84.2%
Yes
3.9%
Yes, but with an exception
11.8%
No
Do you agree that returns should be eligible for processing through the new Same Day ACH clearing and settlement windows? The Payments Authority 2015
87.7%
Yes
12.3%
No
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Alternatives to Interbank Fee
As an RDFI, would your organization support adopting Same Day ACH with no interbank fee? 56.8%
No
19.3%
Yes
17.0%
Would support with or without a fee
6.8%
Don’t know
Summary of RFC Comment Letters
Organizations representing broad categories of originators strongly support the proposal
Organizations representing retailers generally would prefer real‐time functionality
Organizations representing banks strongly supported Same Day ACH
Organizations representing credit unions expressed general support but also concerns about the potential impact on small credit unions as RDFIs
All associations representing financial institutions view interbank fee as critical/mandatory for successful adoption
A few letters opposed Same Day ACH
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Next Steps
The RFC results show strong support for the proposal and for moving forward
• NACHA’s Rules and Operations Committee and other work groups will continue to work on the proposal and address comments
• Most of the topics raised appear “resolvable”
• In order to enable organizations to plan and budget for 2016 work, a final proposal would need to be adopted in the near‐term
Contacts & Resources
NACHA.org
The Payments Authority 2015
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Thank You!
Adrian Brown, AAP
Director of Education
abrown@thepaymentsauthority.org
580 Kirts Blvd | Suite 301 | Troy, MI 48084
(800) 450-2508
info@thepaymentsauthority.org
www.thepaymentsauthority.org
©2015 The Payments Authority. All rights reserved. No part of this material may be used without the prior written permission of The Payments Authority.
This material is not intended to provide any warranties, legal advice, or professional assistance of any kind.
Source: NACHA.org
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