Preparing for Same-Day Automated Clearing House (ACH) Payments

16-CU-06 / September 2016
Preparing for Same-Day Automated Clearing House (ACH) Payments
Subject
Payments
Status
Active
To
Federally Insured Credit Unions

Dear Board of Directors and Chief Executive Officer:

On September 23, 2016, Same Day ACH, an amendment to the NACHA Operating Rules, will become effective, allowing ACH users to send same-day ACH credit payments.1 Same Day ACH builds on existing next-day ACH Network capabilities and establishes a new option for same-day clearing and settlement via ACH. Both ACH Operators will begin delivering same-day ACH credit payments to receiving depository financial institutions twice each banking day beginning September 23.

The Federal Reserve announced its commitment to the Same Day ACH rule in September 2015. Amendments to Operating Circular 4 (OC-4), Automated Clearing House Items, that address implementation of the Same Day ACH become effective September 23, 2016. The revised circular and a complete summary of changes are available for review online.

NACHA rules require all depository financial institutions to be ready to receive Same Day ACH credit transactions on September 23. This letter provides information about the amended rule and will help you prepare for Same Day ACH.

Background

Today, most ACH payments settle on the next business day. However, many businesses and consumers could benefit from same-day processing for purposes such as:
  • Expedited bill payments
  • Same-day payrolls
  • Business-to-business payments
  • Account-to-account transfers

Under NACHA’s Same Day ACH rule, originating depository financial institutions (ODFIs) have the option to send same-day ACH transactions to accounts at any receiving depository financial institution (RDFI), making participation in the rule for the receipt of same-day ACH payments mandatory for all RDFIs.

Originating ODFIs must pay an interbank fee of 5.2 cents per transaction to the RDFI for each same-day ACH forward transaction. This fee will allow RDFIs to recover some of the costs associated with enabling and supporting mandatory receipt of same-day ACH transactions. ACH Operators will collect the fee on behalf of the RDFIs. The fee will settle between the ODFI and RDFI on a monthly basis.

While there is no limit on the aggregate value of a batch of Same Day ACH transactions, the following transactions are ineligible for Same Day ACH processing:

  • International ACH transactions (IATs)
  • Single, large dollar transactions greater than $25,000

Phased Implementation

NACHA is implementing same-day ACH functionality in three phases.
 
Effective Date Description
September 23, 2016 Same-day ACH credits may be used. RDFIs should be ready to receive same-day ACH credits. Funds must be available at the end of the RDFI’s processing day. (Phase I)
September 15, 2017 Same-day ACH debits and credits may be used. RDFIs should be ready to receive same-day ACH debits. Funds must be available at the end of the RDFI’s processing day. (Phase II)
March 16, 2018 Funds from same-day ACH credits must be made available by 5:00 p.m. in the RDFI’s local time. (Phase III)
 
Beginning with the first phase, ODFIs will be able to submit files of same-day ACH payments through two new clearing windows provided by the ACH Operators:
  • A morning submission (10:30 a.m. EST deadline; 1:00 p.m. EST settlement)
  • An afternoon submission (2:45 p.m. EST deadline; 5:00 p.m. EST settlement)

Same Day ACH Impact on Risk

Same-day ACH processing presents the opportunity for a credit union to reduce risk in several areas, as outlined on the following page.

Risk Impact of Same Day ACH
Credit exposure
  • Less time between origination and settlement of ACH items
  • Less outstanding credit exposure incurred by ODFI as result of multiple daily settlements
  • ODFI has option to require ACH prefunding
Counterparty
  • Decreased exposure to settlement risk of others resulting from more frequent interbank settlement
Operational
  • Additional windows to mitigate issues for missed or late next-day origination files, operational delays, or system outages

Credit unions should be aware that moving funds from account to account more quickly will require more timely and efficient cash forecasting in order to meet liquidity needs. Effective implementation of same-day ACH will require credit unions to manage intraday liquidity more closely.

Same-day ACH processing also has the potential to increase fraud risk due to the accelerated timeframe for transactions, giving ODFIs less time to perform back-end risk management functions.  To help mitigate the potential for increased fraud risk, ODFIs should:
  • Emphasize strong authentication and security controls around file delivery and online banking transfers
  • Consider optional ‘tolerance’ limits at file, batch, and entry levels for same-day ACH Originators

Steps to Prepare for Same Day ACH

All depository financial institutions should take the following steps, at a minimum, to prepare for NACHA’s implementation of the Same Day ACH rule:
  • Discuss schedules and deadlines with your ACH Operator
  • Discuss ACH application and process changes with third-party service providers and senders, including corporate credit unions (where applicable)
  • Prepare a same-day ACH operational impact analysis
  • Assess and plan for staffing needs to meet additional operational impact
  • Develop procedures and timelines for internal processes
  • Test your ability to provide funds availability and meet the credit union’s liquidity needs (visibility of future settlement position)
  • Develop an implementation and testing plan
  • Review and revise your business continuity plan
  • Inform and educate members
NACHA requests service providers contact subject matter expert Amy Morris to report on implementation efforts and readiness; you can reach her at amorris@nacha.org, or at 703-561-1100.

Additional Resources

  • Same Day ACH Resource Center (NACHA)
    Offers complete information on Same Day ACH, including implementation checklists for RDFIs, ODFIs, and third-party processors.
  • Same Day ACH Resource Center (Federal Reserve Bank)
    Includes lists of new entry fee billing product codes and accounting transaction codes for Same Day ACH, as well as a comprehensive FAQ.
  • FedACH Customer Support (Federal Reserve Bank)
    Customer support is also available at 1-877-372-2457.
  • Regional payments associations (Local Payments Associations) 
    Your local association can provide assistance as you prepare for Same Day ACH. A guide to the services offered by regional payments associations and help with locating a regional payments association are found at https://www.nacha.org/.
I encourage you to review this letter and to contact your regional office or state supervisory authority if you have any questions on this subject.

Sincerely,

Rick Metsger
Chairman
 

1NACHA administers the ACH network.  Voting members of NACHA approved Same Day ACH in May 2015.