In fewer than nine months, the first phase of “same-day” automated clearing house (ACH) transactions launches. By the time that the entire rule is operational (Phase Three begins March 16, 2018), customers of the nation’s RDFIs, ODFIs, ACH Operators and Third-Party Service Providers will be able to initiate a payment in the morning and have it settled and the funds transferred by 5:00 p.m. that same afternoon. The rule speeds the completion of financial transactions substantially, giving both the financial institutions and their customers the opportunity to track more accurately the progress of their monetary transmissions.
While RDFIs are required to receive same-day ACH (SDA) transfers, for ODFIs, the opportunity is optional. For those ODFIs that choose to offer SDA for their products and services, diligent preparations before the Phase One start day — September 23, 2016 — will be critical for a smooth and painless transition.
Only credit entries to start
There are three distinct transaction elements that the new rule covers: credit entries, debit entries, and funds availability. To ease into the full rule implementation, NACHA’s experts and membership determined that facilitating SDA for credits would be the best first step. Credits cause fewer returns and exceptions than do debits, so they provide the best opportunity for an “errorless” transition.
All transaction classes are affected
NACHA identified 10 primary (and 63 secondary) use cases that, together, will generate 1.4 billion SDA transactions:
- In the Business-to-Consumer class, SDA payroll and urgent payments and refunds will eliminate potential late fees and HR problems.
- In Business-to-Business transactions, SDA invoicing and tax payments trigger accounts payable and prevent unnecessary IRS attention.
- Consumer-to-Consumer SDA transactions will relieve millions of small businesses and their local customers of the check-writing/debit card challenges that currently exist.
- For Consumer-to-Business transactions, bill payments, POS conversions, collections and debiting will achieve a more “cash like” settlement speed.
ODFI rule implementation strategy
ODFI’s opting into the SDA system should consider the transaction classes that they handle as they develop their enterprise SDA implementation strategy. At the very least, ODFIs should consider these suggestions as they implement their SDA system:
- Evaluate the risks within existing products and determine how they will be affected by SDA processing.
- Identify existing ACH clients that might be eligible for the service, as well as those for whom SDA might not be a good fit.
- Identify existing applications and systems that may be affected by the faster transaction times. Internal corporate programming will need revising, and agreements with downstream ACH Operators and Third-Party Service Providers will need to be modified.
- Budget for new fees and staffing. ODFIs will be required to compensate RDFI’s 5.2 cents per transaction fee. Budget impacts and staffing considerations should also be included in enterprise SDA preparations.
- Review policies and procedures. The rule will change existing policies, and their accompanying procedures will need to modify accordingly. For instance, two new processing cut-off times will be added which will require staff and resource allocation; credit risk management procedures will need to match the speed at which credit is offered; and fees for products and reversals should reflect the value of the SDA offer.
- Effective entry dates set by Originators may change at the behest of the Originator. NACHA recommends that the content of the “Company Descriptive Date” field (5 record, field 8) use the convention: “SDHHMM,” or “Same Day Hour Hour Minute Minute.” For example, using this convention would show “SD1300” for settlements requested at 1:00 p.m.
- Communicate with ACH Operators, Processors, and Third-Party Providers to coordinate systems integration from origination to funds availability.
Careful, prudent ODFI planning will ensure that SDA systems come online smoothly, securing fewer reversals, improved profits, and happy customers.
