Same-Day ACH Payments

Same-day processing starts Friday on the nation’s automated clearing house network, and months of preparation and planning appear to be paying off. “Everybody is heads-down getting it done. We haven’t been getting any SOS calls,” Jane Larimer, executive vice president of network services at NACHA, the governing body for the ACH, tells Digital Transactions News on the eve of the big day.

Larimer says NACHA has not made same-day volume projections for the immediate future, but adds that most major financial institutions are set to participate. In a NACHA survey of the country’s 25 largest originating institutions by volume, 22 indicated they would send same-day transactions by the end of the year, Larimer says, adding a majority of these big banks “said they’d be ready to go Day 1,” she says.

The ACH reaches nearly all U.S. financial institutions, and all of these are obliged by the same-day rules to receive these payments. But they are not under any obligation to send same-day transactions, so the more that indicate readiness, the more same-day volume the system will carry. In large part, institutions may be moved by pressure from customers. “There seems to be strong interest in using” same-day clearing, Larimer notes.

Friday caps a long odyssey at NACHA to bring faster settlement to the 42-year-old ACH system, which moves $41.6 trillion in payments annally. The effort also fits into a mosaic of faster-payment initiatives that have cropped up in recent years to meet perceived demand to move funds either the same day or in real time.

The ACH is starting Friday with so-called credit transactions, which are used for such payments as payroll deposits and person-to-person transfers. On Sept. 15, 2017, same-day settlement will be enabled for ACH debits, used often for bill payments. In effect, the network is moving up settlement by a day by adding two daily settlement windows to the existing one.

Larimer expects same-day debits to be a popular option. “I think we’ll see large volumes moving onto that as well,” she predicts. One popular scenario will be last-minute payments on large bills, such as mortgage statements or property-tax assessments, where late-payment penalties can be steep, Larimer says. In this case, same-day speed will be “a big benefit,” she notes.

As for the development of real-time systems, Larimer is sanguine. The Federal Reserve has been shepherding a massive effort to design a real-time payment system, and at the same time organizations as diverse as The Clearing House Payments Co. LLC, Dwolla Inc., Early Warning Services LLC, and Visa Inc. have built or are developing solutions to move funds with real-time effect. These efforts, Larimer says, are “complementary” to, rather than competitive with, what the ACH is doing.

Factors such as transaction cost and timeliness will decide whether consumers and businesses opt for real-time or same-day settlement for any transaction, Larimer argues, with the assumption that real-time options will carry a premium. “The question will come down to, do you need the money in minutes?” she says. “What’s more important, settlement at 2 p.m. today or 5 p.m.?”

In the meantime, anticipation of the start of same-day processing was building steadily at NACHA’s Herndon, Va., headquarters late Thursday afternoon. “The excitement here is really palpable,” reports Larimer.