(Correction) Add Same-Day Processing To Your Compliance List
The Federal Reserve yesterday decided to go along with NACHA and mandate that all financial institutions be able to provide same-day payment of ACH transactions. Currently, a credit union receiving an ACH has until the next business day to complete the transaction. This mandate will be phased in starting September 23rd 2015 and is slated to be fully operational by March 16, 2018.
The shift to mandatory same-day processing capability seems like a really big deal to me but has so far not generated all that much excitement in CU Land. Under the new framework, NACHA envisions two “submission and settlement windows” of 10:30 a.m. ET with settlement occurring at 1:00 p.m. and an estimated afternoon submission deadline at 3:00 p.m. ET with settlement occurring at 5:00 p.m. The Receiving Depository Financial Institution will receive a Same Day Entry fee of 5.2 cents for each same-day transaction (That’s right, we are seeing the birth of a new fee for merchants and financial institutions to squabble over for years, nay decades, to come).
If you’re a small credit union concerned about the costs of implementing same day processing the Fed feels your pain…to a point. In approving these changes it noted that upgrading to accommodate same day processing may impose new costs on smaller institutions but it concluded “that exempting small institutions would undermine the ubiquity—and therefore the utility—of the service.” It also rejected the use of a tiered fee system with smaller institutions getting more than 5.2 cents. Remember not all parties will request same day processing. The Fed expects that any additional expenses will ultimately borne by the customer requesting expedited settlement.
I know a few of my more astute readers are asking isn’t this old news? Yes and No. NACHA already approved changes to its operating rules in May 2015. The Fed, along with the Electronic Payments Network operates the ACH system and it requested feedback on whether or not it should go along with the plan. In addition, the fed has offered financial institutions the option of voluntarily providing same day settlement since 2010 but less than 1 percent of FedACH customers are using the service.
This moves the payment system one step closer to where it ultimately has to be: real-time clearance. As your average consumer gets used to paying at the checkout line with a wave of her IPhone and settling a bar tab by simply transferring money into her friend’s account the idea of a gap between payment and settlement won’t be acceptable. Here is a link to the Fed’s announcement and a link to a previous blog I did on the subject,
Entry filed under: General.