Same Day ACH Explained

NACHA’s recent announcement of membership approval of the Same Day ACH rule is great news for the payments industry in the U.S. The Same Day ACH ruling is an opportunity for financial institutions and payments providers to adapt their systems to handle intra-day reconciliation and improve risk management controls—two prerequisites for graduating to real-time payments.

What Changes with Same Day ACH?

Currently, the earliest that an originator (sender) can expect ACH transactions to settle is next business day (T+1), with receiving institutions required to make funds available to receivers by 9:00 a.m. T+1 local time. Same Day ACH will speed this process up by at least 14 hours for truly same-day settlement.

The NACHA ruling stipulates two new settlement windows throughout the day—one at 1:00 p.m. EST and another at 5:00 p.m. EST. Receiving financial institutions will be required to post funds sent as Same Day ACH to customers’ accounts by 5:00 p.m. local time at the latest, but they may post them earlier (if they can and if the funds settle via the 1:00 p.m. EST window).

Simply put: people will get their money faster.

NACHA Same Day vs. FedACH Same Day: What’s the Difference?

It’s worth noting that Same Day ACH isn’t an entirely new concept. Back in 2010, the Federal Reserve Bank (FRB) offered an opt-in, same-day settlement service for certain ACH debit payments through the FedACH service. The service was limited to transactions arising from consumer checks converted to ACH and consumer debit transfers initiated over the Internet and phone. What’s more, a financial institution could change its opt-in status on a monthly basis. So, in all actuality, very few consumers were actually reaping the benefits of this service. In fact, the FRB itself has acknowledged that, in the five years since its introduction, the FedACH same-day service has experienced very limited adoption; less than 100 depository institutions are still participating. This is a paltry number when you consider that there are over 6,800 financial institutions in the United States (i.e. less than a 1.5% adoption rate).

Thankfully, things are a bit better this time around. With NACHA’s Same Day ACH decision, all financial institutions in the U.S. will be required to accept same-day transfers for posting to their customers’ accounts. That being said, not all financial institutions will be required to offer Same Day ACH services to their clients. So a bit better, but still not perfect.

Furthermore, NACHA’s Same Day Ruling stipulates a 5.2 cent fee for each transaction to be paid by the sending bank to the receiving bank. This fee is to help offset costs incurred by smaller banks who will need to upgrade their reconciliation and risk management systems and who might otherwise not reap any direct financial benefit from participating in same-day settlement with larger financial institutions.

Timeline

Same Day ACH will be rolled out in three phases as follows:

• Phase 1 – Sept. 23, 2016: ACH credits only (i.e. outbound payments being pushed to recipients) – two new windows, 1:00 p.m. EST and 5:00 p.m. EST with the 5:00 p.m. settlement time enforced. Funds availability is 5:00 p.m. receiving bank’s local time.
• Phase 2 – Sept. 15, 2017: ACH debits (i.e. pulling funds from payers’ bank accounts) is added.
• Phase 3 – March 16, 2018: the additional settlement time of 1:00 p.m. EST is enforced (with 5:00 p.m. EST settlement time option still remaining, of course).

Same Day ACH at Hyperwallet?

Fast worker payments and enhanced payment flexibility are two foundational components of the Hyperwallet payout platform. With Same Day ACH on the Hyperwallet platform, a business client paying multiple workers in the U.S. will have the ability to send earnings further, faster. Moreover, if a business client hits a snag and is forced to delay calculating earnings normally processed through regular ACH, Same Day ACH availability ensures that the transfers can still be executed on time. Workers who select the Same Day ACH payout option will be guaranteed to receive good funds in their bank account by 5:00 p.m. local time. So don’t worry about canceling that fancy dinner date tonight; with Same Day ACH, you never have to worry about late deposits.

And, even though Same Day ACH comes with a price tag (it costs more than regular ACH transfers), the service is still considerably cheaper than domestic same-day wires. That being said, it’s best to inquire with your bank concerning any fees associated with Same Day ACH services. Even so, it’s my belief that, once Same Day ACH is available in the Hyperwallet back office, clients who are currently using Hyperwallet to send domestic wires under $25k will be able to fund their accounts using Same Day ACH and enjoy significant cost savings on both ends of the transaction.

From Same Day to Real-Time

In addition to Same Day ACH services, the Federal Reserve Board’s January 2015 publication “Strategies for Improving the US Payments System” put forth a call for further improvements to major aspects of the U.S. Payment System, calling for faster payments in particular. The board has also established a broad-based Faster Payment Task Force to start grappling with what a faster national payments system could entail.

Same Day ACH is a significant step forward for the U.S. Payment System. Let’s hope that benefits derived from its implementation will continue to add momentum to industry efforts focused on bringing the U.S. closer to an easily accessible, low-cost, real-time (or near real-time) payments system.