Is The Industry Really Ready For Faster ACH Payments?

http://www.pymnts.com/wp-content/uploads/2016/08/NACHA-podcast-ep-1.m4a

It’s official — the launch of Same Day ACH payments across the U.S. is less than 30 days away.

The good news is, it’s happening. The question that remains is whether the industry is actually ready for the significant transformation faster payments is sure to bring.

Phase one of the Same Day ACH initiative goes live on Sept. 23, and with it will begin the shift to three daily settlement windows, five days per week, in order to provide both consumers and businesses access to more efficient transactions.

And it will enable this, on day one, with all 14,000+ banks and credit unions in the U.S.

According to NACHA President and CEO Jan Estep, not only is the industry ready for the change, but it has rallied together to create this new option for same-day clearing and settlement of ACH payments between all the banks and credit unions throughout U.S.

Driving Towards Ubiquity

Under this new Same Day ACH rule, two additional same-day settlement windows will be added to the ACH network. This is expected to increase the movement of funds between financial institutions and help support ubiquity, which is the linchpin for making Same Day ACH successful.

Estep described the importance of ubiquity as being the absolute certainty that a payment can get to anyone else — a consumer or a business — on the same day electronically, regardless of where they bank.

It’s a powerful concept and one that has the potential to radically change the way payments are both sent and received.

“With Same Day ACH, a payment can be sent to and received by any bank account in the U.S., because all financial institutions will be required to receive Same Day ACH transactions,” Estep explained. “That really provides tremendous value for all the users of the ACH network.”

NACHA said that the nation’s financial institutions are ready for Same Day ACH.  Estep noted that this is particularly relevant on the receiving financial institutions’ side, due to the requirement that all financial institutions are obligated to receive Same Day ACH. However, NACHA’s survey results also found that 71 percent of financial institutions said they will also make received funds available to their clients by 5 p.m.

That, Estep said, reflects the level of enthusiasm that receiving banks have for the new service, since the requirement to support a 5 p.m. deadline is actually not scheduled to be put into place for the next 18 months.

On the originating side, the picture is just as promising.

According to NACHA’s research, 95 percent of the  nation’s top financial institutions that help their customers send ACH payments plan to offer their clients Same Day ACH origination services by the end of this calendar year.

Estep confirmed that 100 percent of those surveyed who said they will offer Same Day ACH origination services also plan to make same-day payroll payments available, while 95 percent said they will offer same-day business-to-business payments, in addition to services such as expedited bill payment and person-to-person payments.

It’s quite a feat to wrangle approximately 14,000 financial institutions into moving in the same direction by a certain date, but it looks as though the industry is well on its way when it comes to Same Day ACH.

Prepping For The Big Move

As the Sept. 23 kickoff date for phase one quickly approaches, Estep said that banks and credit unions should be doing certain things to prepare to both receive and originate Same Day ACH payments.

On the receiving side, Estep explained that financial institutions must have discussions internally and request any support needed from their vendors and processors. It’s also important for financial institutions to understand the schedules for receiving Same Day ACH and determine when they will post those transactions to the end user account, she added.

When it comes to the originating side of Same Day ACH, banks and credit unions have the opportunity to take advantage of what Estep called the “fun part” of the shift, which includes thinking about the new capabilities supported across the industry and meeting the needs of their clients in new ways.

“Many financial institutions are also looking at how they can create the new innovative services to meet the changing demands in the industry,” Estep pointed out, “so they need to understand how Same Day ACH is available for virtually any payment, although it is not applicable to international ACH or for larger transactions over $25,000.”

In an effort to help financial institutions as they transition into the new faster payments environment, NACHA supports a Same Day ACH Resource Center. The site provides a variety of educational materials in the form of white papers, webinars, toolkits other resources.

The information is delivered in different formats for specific audiences – very technical information for those who need to implement, and information that is easier to understand for end users.

One final key aspect Estep said banks and credit unions should keep in mind as the industry moves closer to Same Day ACH is the ability to move together both a payment and a substantial amount of information related to the transaction.

“Providing that benefit of straight-through processing with the potential to receive not only the payment but the information, and then post it directly to an account without human intervention, is really one of those key places where doing that on the same day can provide tremendous value to the industry,” she said.