Friday, May 29, 2015
The automated clearing house system (ACH for short) is an electronic payment system created in the 1970s. It operates in a store-and-forward, batch settlement mode in which final settlement lags the initiation of transactions by at least one day, often two days. The ACH is perhaps best known as the mechanism used for direct deposit of payroll. It also supports business-to-business applications (such as payments to merchant accounts for settled card transactions and large-dollar trade payments) and numerous consumer-to-business payments (bill payments and online purchases among them).
NACHA, a membership organization that develops and manages rules and standards governing the ACH, has been pushing for same-day settlement of at least some ACH transactions. It stated in May 2015 that its membership has approved a plan to support same-day settlement options for some types of payments.
NACHA President and Chief Executive Officer Janet O. Estep said the vote would help move the ACH into the 21st century. “Same Day ACH serves as an immediate action the industry has undertaken to modernize the payments system and creates a building block for a variety of products and services,” she said in a statement.
The rule, as adopted, mirrors closely a proposal NACHA issued in 2014, with a few modifications, including a retreat on pricing. NACHA had proposed that banks and credit unions originating same-day ACH payments pay a per-transaction premium of 8.2 cents; the final rule includes a modified pricing approach that is should reduce the fee to about 5 cents.
The new rule adds two new windows to the daily ACH processing cycle and directs financial institutions on how to comply.
Same-day ACH will be implemented in a phased approach, NACHA said. The first phase, scheduled to begin in September 2016, will open up same-day settlement options for several specific credit payment situations, including hourly payrolls, person-to-person payments and bill payments.
Phase 2 will extend same-day settlement options to ACH debits, which have numerous consumer bill payment applications, including utilities, mortgages and credit cards. In the third phase all financial institutions receiving same-day ACH payments will need to be able to make those funds available to recipients by no later than 5 p.m. local time on the day of receipt.
The notion of same-day ACH payments is not new. A proposal that was quite similar to the one just approved was shot down by the NACHA membership in 2012. This time around NACHA had an important ally: the Federal Reserve, which has become a vocal champion of faster payments.
The 12 Federal Reserve Banks offer a same-day settlement option to financial institutions that clear ACH payments through the Reserve Banks. (The Clearing House, a New York-based payment company, operates a private sector ACH network in competition with the Fed. It claims to handle about 50 percent of the country’s commercial ACH volume.) And on May 21, the Fed issued a proposal to enhance the Reserve Banks’ same-day services by incorporating the new NACHA rules.
Additionally, the Fed made clear in a recent policy statement – Strategies for Improving the U.S. Payment System – that it wants financial institutions and their customers to move to ubiquitous, near-real-time payment options and away from batch processing payments.
ACI Worldwide said research it conducted recently suggests the move to same-day ACH will be met with favor. But at least some retailers aren’t convinced. ACI surveyed a group of payment professionals attending the NACHA Payments conference in April 2015 and found 97 percent believe same-day ACH will become a reality within the next five years; up from 92 percent last year. Additionally, 92 percent of those queried this year said same-day ACH will add “significant” value to corporate customers of financial institutions, ACI said.
However, the National Association of Convenience Stores has taken issue with the new rule, arguing that it “introduces worrisome fee-setting akin to a swipe fee.” Whether the fee charged originators of same-day ACH payments is 8.2 cents or 5 cents, “the fact that NACHA is setting the prices that all banks will charge for ACH amounts to price-fixing, with NACHA as the hub in a classic hub-and-spoke conspiracy,” NACS insisted in a statement published on May 22. “By setting a central fee, NACHA raises serious antitrust concerns and distorts the market.”
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