Same Day ACH: What You Need To Know

August 1, 2016

On September 23, 2015, the Federal Reserve approved NACHA’s Same Day ACH solution. The move will help businesses and consumers move money faster through same day settlement for practically any ACH payment.

For several years, the industry has been interested in improving ACH settlement and processing. A similar such same day proposal by NACHA was voted down in 2012 due to lack of sufficient business rationale. Over the next three years, NACHA engaged with the industry and came up with a revised proposal with ten distinct business cases to support same day payments. This time around, Same Day ACH meets the needs of customers for uses cases such as payroll, bill payment, urgent claims, invoices and taxes amongst others. It’s an example of how the industry is perceptive towards its consumers’ needs and is working towards providing them with the payments speed they deserve.

Same Day payments will be rolled out in three phases over the next two years so that financial institutions and businesses have sufficient time to adapt their processes and operations for same day settlement. Same Day ACH payments will be an option provided in addition to the existing ACH schedules.  A fee will be imposed on Same Day ACH transactions to help receiving financial institutions recover the costs of supporting Same Day ACH.

The date when Phase 1 of Same Day ACH rolls out is looming ahead of us – September 23, 2016. In Phase 1, only ACH credits will be processed on the same day.  Phase 1 will focus on supporting use cases such as hourly payroll, person-to-person payments and same-day bill payments. Same Day ACH debits will be rolled out in Phase 2 which is proposed to begin in September 15, 2017. Phase 2 will support a wider range of consumer bill payment use cases such as credit card, utility, mortgage and loan payments.

For both Phase 1 and Phase 2, two new clearing windows will be provided by the ACH Operators to allow originating financial institutions to submit Same Day ACH Payments files viz.:

  • 30 a.m. ET with settlement at 1.00 p.m.

  • 45 p.m. ET with settlement at 5.00 p.m.

In Phase 3, which is scheduled for March 16, 2018, receiving financial institutions will be required to make funds available to customers by 5.00 pm local time for same day credit entries.

Other than international transactions and transactions exceeding $25000, all types of monetary and non-monetary ACH payments (credits and debits) except ENR (Automated Enrollment entry) will be eligible for same day processing.While Same Day ACH origination is optional, it is mandatory for participating ACH financial institutions to process incoming Same Day ACH items.

Same Day ACH will definitely have an impact on day-to-day operations and financial institutions will have to consider the following as outlined by NACHA:

ODFI (Originating Depository Financial Institute)

  • Figure out the new file submission and delivery schedule with their ACH operators

  • Revise internal processing schedules and procedures to accommodate new windows for Same Day Entries

  • Review applications and systems that may be impacted by Same Day Entries

  • Gather information from the ACH Operator regarding collection of Same Day Entry fees

  • Create a procedure to hold payment entries that are received from an Originator in the same day window but that is not the Originator’s desire

  • Indentify customers and business models to offer Same Day

  • Discuss eligibility requirements for Same Day Entries

  • Discuss proper use of the Effective Entry Date and impacts of improper Effective Entry Dates.

RDFI (Receiving Depository Financial Institute)

  • Figure out the new file submission and delivery schedule with their ACH operators

  • Revise internal processing schedules and procedures to accommodate new windows for Same Day Entries

  • Processing entries based on the Settlement Date provided by the ACH Operator

  • RDFIs do not need to determine same day eligibility for processing

  • In Phase 1 RDFIs will only receive credit entries as same day entries. Beginning in Phase 2, RDFIs should be prepared to also receive debit entries as same day entries

  • Phase 3 will require RDFIs to provide funds availability at 5:00 pm local time for same day credit entries

  • Decide on whether to use the new same-day processing windows to send returns and NOCs

  • Getting information from ACH Operator regarding collection of the Same Day Entry fees

Ultimately, Same Day ACH will make ACH processing only 12 hours faster than the standard next day ACH settlement. Same Day ACH is just a step towards the ultimate goal of immediate/real time and secure payments. However, it does offer every bank an opportunity to revisit the services they provide to their customers. Same Day ACH can help financial institutions modernize their payments systems for the time being and lay down a foundation for real time payments in the future.

        

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