Same-day ACH

In March, credit unions enter the last chapter in the transition to same-day ACH. It's been a long road to this point, but for now the focus is on what NACHA – the Electronic Payments Association dubs "phase III." Here's what's happening, how pros say you should plan for it — and whether this is really the end of the same-day ACH transition.

What's happening and when?

Starting on March 16, 2018, credit unions and other financial institutions receiving same-day ACH payments have to make those funds available to depositors by 5:00 p.m. local time.

Credit unions and other financial institutions that originate same-day ACH payments will have two more clearing windows through which to submit same-day ACH payment files: 10:30 a.m. ET (settlement at 1:00 p.m.) and 2:45 p.m. ET (settlement at 5:00 p.m.).

Both credits and debits are eligible for same-day processing, but international transactions and transactions over $25,000 are not eligible. NACHA estimated that 99% of current ACH network volume will be eligible for the new rules. Credit unions and other financial institutions can get more details on the NACHA website.

What credit unions need to do: Talk with vendors

Credit unions that don't have automated systems will need to consider the logistics around when they'll receive files, from whom and when. That may mean having a conversation with vendors about what the daily file-exchange routine will be, New England Automated Clearing House Association President and CEO Sean Carter said.

"[The file] may come to you at 4:35 and you have to get it done by 5:00. So working with vendors is very important to understand," he said. "Forget about what NACHA says, forget about what the Fed delivery schedule is, what is your vendor saying that their schedule is?"

Credit unions should find out when their vendors will be ready for phase III, and they should put a plan B in place, he added.

"If you have a vendor that is not getting you the files in an orderly fashion enough for you to make the 5:00 p.m. — if your vendor doesn't give you your entries till 5:05 p.m. — there's no way that you can meet the 5:00 p.m. cutoff," Carter warned. That's a problem.

"Use of a receiving point does not relieve you of your obligations, so you don't have the defense of, 'Oh, my vendor was late,' unless it's due to an act of God or what we call excused delay," he explained. "You can't say, 'My vendor screwed up,' because that's not a formidable defense against the violations."

Check staffing

Deb Hoster, AVP of Electronic Services at Alloya Corporate Federal Credit Union, said credit unions will also need to look at their staffing schedules and ensure the right people are around at the right time to process files. Naperville, Ill.-based Alloya Corporate FCU has $2.9 billion in assets and about 1,500 members.

"I think that the majority of the credit unions are already posting before they're leaving for the day. So that, I'm assuming, is probably before five o'clock local time. So hopefully a lot of them are in compliance — if not, they have to switch it around and make sure they've got special staff coverage to get the processing done," she explained.

But most credit unions likely made necessary scheduling changes and technology upgrades back when phase I of same-day ACH occurred back in 2016, Hoster noted.

"We've seen a lot of credit unions doing some special file scripting with their data processors or if they have an internal IT department so that they can get the files to automatically post unattended, if you will," she added.

The end of an era — or is it?

Phase III has long been billed as the last step in the transition to same-day ACH, but like daytime soap operas, just when you think it's over, there's another chapter.

Last December, NACHA solicited comments on proposals to add a third same-day ACH processing window, provide faster funds availability to receivers of same-day and non-same-day ACH credits, as well as raise the per-transaction dollar limit on same-day transactions to $100,000. The group is also exploring interest in ACH processing on weekends and holidays.

"Deferred settlement until Mondays (or Tuesdays on three-day weekends) can cause hardships for cases such as consumer payroll payments and bill payments, and accountholders might not have the best information available about their true available balances," according to NACHA.

Raising the dollar limit will likely be especially popular with credit unions and other financial institutions, Carter noted.

"A lot of people feel that that's a no-brainer because there's certain payroll companies and such that can't use [same-day ACH] because the offsetting debit is too big for the same-day file. There's others, like me, who don't believe there should be a limit. I think institutions are grown-ups and should have the right to do it and put systems in place to catch that," he said.

Looking back and ahead

Growth in the use of same-day ACH has put it on pace to hit 120 million debit and credit transactions a year, according to recent data from NACHA. In 2017, there were 75.1 million same-day ACH transactions totaling $87.1 billion, an average $1,161 per payment. December 2017's 15.2 million transactions represented a 51% increase over November, indicating widespread interest in the payment method, NACHA said.

Carter and Hoster said credit unions have poured a lot of time and resources into adapting to same-day ACH.

"The hardest part was definitely scheduling, I would say, and getting the operational checklist in place to be able to receive multiple files a day," Hoster said. "There's a lot of impact to how our credit union balances, how they handle their exceptions, it was just … This was a very significant operational impact and change for everybody to have to take on. So I think doing that was probably the hardest."

"We tried to educate as much as we could. We did some special training sessions, we talked about balancing … I really think everybody, all in all, did a really good job. It wasn't as bad as I thought it would be," she added.

Speeding up payments is good for credit unions, too, Carter said.

"I just think the expectations of the members of credit unions and businesses around are changing, so when that happens everybody has to kind of dig in and meet those expectations. Part of that is going to be more processing windows, the ability to move their own money quicker," he noted. "If you don't do that, then the fintechs provide services and the credit unions get cut out of the transactions."

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