For businesses and consumers, the Automated Clearing House (ACH) Service has been gaining in popularity as a means of transferring money electronically. It’s relatively quick and easy, without the expense associated with wire transfers. Typically ACH transfers have a 48-hour settlement timeframe, and many settle within 24 hours. In order to move money even faster within the ACH network, NACHA, the Electronic Payments Association, has made a same-day ACH proposal that outlines the rules governing same-day ACH practices.
At the end of September, the Federal Reserve Banks announced that the Federal Board had reviewed the same-day ACH practices proposed by NACHA, and was in support of the proposal. While the Federal Reserve already offered FedACH SameDay Service, NACHA’s proposal differed from the current offerings in two significant ways:
The Federal Reserve Board agreed that these two points were important to the success of the program. But what does this mean for businesses that use ACH for payments and money transfers?
The goal of same-day ACH is to encourage use of the ACH network for certain time-critical payments, accelerated financial settlements, and improve funds availability to payment recipients. It’s a more efficient electronic payment option (and less costly than wire transfers) for person-to-person payments, same-day payroll payments, expedited bill payments and other types of transactions.
Right now, receipt of same-day ACH transactions is not mandatory, resulting in few institutions offering the service. The NACHA proposal, recognizing the need for all institutions to be involved in order for the service to be a success, requires receipt by all financial institutions of same-day ACH transactions. Receiving depository financial institutions (RDFIs) must make funds available from same-day ACH credits to their depositors by 5 pm local time.
The proposal also establishes an interbank fee, paid by originating depository institutions (ODFIs) to RDFIs for each forward same-day transaction to help offset the costs associating with implementing and operating the system. This price charged between banks was set at 5.2 cents per forward transaction. This per-transaction price may be reduced if the volume of same-day ACH transactions exceeds the projected volume by 25 percent. The price to you, the customer, will vary based on your financial institution. There will be no charge to the receiver.
For those who do not wish to incur the costs associated with same-day ACH transfers, next day ACH options will continue to be available.
Same-day ACH transfers will have two daily windows (note that these are the Federal Reserve Bank deadlines, your local financial institution may require different timing):
Virtually all types of ACH settlements, both credits and debits, would be eligible with the exception of international ACH transfers and high-value transactions over $25,000. According to NACHA, these account for approximately one percent of current ACH transactions.
The same-day ACH program is expected to be rolled out in three phases:
September 23, 2016: ACH credit transactions will be available for same-day processing through the Federal Reserve at 10:30 AM ET and 3:00 PM ET. This will be in support of transactions such as hourly payroll, person-to-person payments and same-day bill pay.
September 15, 2017: Same-day ACH debits will be added, which will allow for a variety of consumer uses such as paying utility bills, mortgages, loans and credit card payments.
March 16, 2018: Funds from same-day ACH credit transactions must be available to customers by 5 pm local time.
More changes to the rollout timeline and specific details may be coming.
But what does this mean to you?
As a business owner, it ultimately comes down to having another electronic option to transfer funds within the same day. There will be fees associated with the transaction, but they are expected to be less than the current costly wire transfer fees. This opens up the possibility for same-day payroll transfers, with funds being available to employees at 5 pm local time. It also means being able to make same-day bill payments. It reduces “float time,” meaning that you get to keep your money longer, or even receive funds more quickly. As same-day ACH becomes more the norm, more options for same-day payments will become available.
For questions regarding same-day ACH, please contact your Tricom Portfolio Management professional.
Sources:
Federal Reserve System, Docket No. OP-1515, Enhancements to Federal Reserve Bank Same-Day ACH Service, http://www.federalreserve.gov/newsevents/press/other/other20150923a1.pdf.
NACHA, Same Day ACH: Moving Payments Faster, Sept. 23, 2015, https://www.nacha.org/rules/same-day-ach-moving-payments-faster.
Paille, James. Are You Ready for Same-Day ACH Electronic Payments? Aug. 7, 2015, http://www.cpapracticeadvisor.com/blog/12100686/are-you-ready-for-same-day-ach-electronic-payments.
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