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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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November 2, 2015


Will NACHA's Same-Day ACH Rules Change Be an Exception-Only Service, At Least in the Short Term?

In May 2015, the 40-plus voting members of NACHA contingently approved mandating the acceptance of domestic same-day ACH payments by receiving banks. The voting members approved a three-phase development lasting 18 months. The first phase, starting in September 2016, is limited to credit pushes, followed one year later by debit pulls in the second phase. All payments are subject to a $25,000 maximum. By the final phase in March 2018, receiving banks will be required to make credit payments available to the receiving account holder by 5 p.m. local time to the receiving bank. Funds availability in the earlier phases is by the receiving bank's end-of-processing day. The service offers both a morning and afternoon processing window. A same-day return-only service is offered at the end of the business day. Lastly, originating banks are obligated to pay a 5.2 cent fee for every payment to recover costs to receiving banks.

Last month, the Federal Reserve Board of Governors removed the contingent part of the above approval by allowing the participation of FedACH, which serves as an ACH operator on behalf of the Reserve Banks. Approval followed a review of comments submitted by the public, of which a preponderance of the responses was favorable to FedACH participating in the service.

This was not the first time NACHA tried to mandate same-day ACH. Back in August 2012, a ballot initiative to mandate acceptance failed to receive a supermajority required for passage. Failure was due to a variety of reasons, and it was difficult to discern one overriding reason.

I think that most observers would agree that the earlier rollout of the Fed's proprietary opt-in, same-day service in August 2010 and April 2013 set the groundwork for mandating same-day.

As with any collaborative organization like NACHA, compromises were needed to garner sufficient votes for passage. The compromises included:

  • Same-day payment eligibility rules change due to a multi-phase development cycle requiring one-and-half years to complete from start to finish.
  • Providing certainty to the receiver that funds availability will be expedited on the day of settlement as part of the final phase, rather than earlier, which only requires posting by the receiving bank's end-of-processing day. The bank's end-of-processing day can be as late as the morning of the following business day.
  • Delaying a debit service by one year after the rollout of the phase one credit service will, to the potential surprise of the payment originator, delay settlement of debits one business day later than would occur for credits.
  • Any payment amount over $25,000 will settle one business day later than the payment originator may have expected if the payment originator is not aware of the payment cap.

Given these compromises, what do you think financial institutions can do to accelerate broader adoption of same-day?

By Steven Cordray, payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

November 2, 2015 in ACH , regulations , regulators | Permalink

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