Same Day ACH Phase II Looms
On May 19, 2015, NACHA announced that it gave the green light to a three-phase implementation plan for Same Day ACH. Phase I, which rolled out last Sept. 23, increased the movement of funds between financial institutions to three times per day and required credit unions to receive and process same-day ACH credit transactions.
On Sept.15, 2017, phase II kicks in, requiring credit unions to provide Same Day ACH debit capabilities, too. International ACH transactions and single transactions of more than $25,000 are excluded.
The advent of phase II makes same-day processing possible for practically any ACH payment, according to NACHA, the Electronic Payments Association. And that's a lot of payments. In 2016 the ACH network handled more than 25.5 billion transactions — a year-over-year increase of 5.4%, NACHA reported. Those transactions amounted to more than $40 trillion in 2016. The number of transactions grew another 6.9% in the first quarter of 2017, moving approximately $11.5 trillion through the financial system during that time.
“The important thing for credit union teams to know [is] that September 15 is going to be here before you know it,” Northwest Credit Union Association Director of Compliance Services David Curtis warned.
“Take the time to review the information that NACHA has provided. Check with your internal ACH staff and your third-party ACH business partner to ensure your credit union is well underway preparing to receive and process Same Day ACH debit entries.”
NACHA President/CEO Jan Estep said credit unions should take certain steps now to ensure things go smoothly.
Make Sure Everyone Understands Effective Entry Dates
Using a default “today's date” to originate ACH debit transactions increases the chances that a credit union will debit a member too early, Estep warned.
“If you don't have a proper date in the effective entry date for settlement, it will just move into the next batch cycle. With a credit, that may mean that you get your money a day earlier than you should have. That's okay when you’re receiving money. It's not so nice when you are being debited for something,” she explained.
Review Your Authorization Language
“Originators do need to make sure they’re using that effective entry date appropriately and reviewing their authorization so that the timing of the debit is understood. It's a great feature for a business to be able to say, ‘Yes, you can pay your bill today and this is when we’ll debit you,’ but they just need to make sure that that's clear,” Estep said.
Learn Where Things Can Go Wrong
It's important to remember that credit unions receiving ACHs don't know the date or timing for which a debit entry has been authorized — they only find out something is wrong when somebody complains. A written statement from the receiver lets a credit union return an unauthorized debit, NACHA said.
Though the rules don't specify exactly when a receiving credit union has to post a debit entry to a receiver's account, NACHA warned that delays could affect the credit union's access to Federal Reserve settlement accounts and cause confusion among members who try to use the funds before the debit is posted.
Prepare for a New Routine
“I think the planning should be around when do we pick up files, when do we post the files, and how can that help us move our internal operations so that we don't have as many peaks and valleys?” Estep said. “It really helps to smooth out operations. That is of benefit to those that are behind the scenes.”
“You simply have to be ready, and if you’re not, you’ll be getting files even of you weren't planning on them,” she said.
“We now have three official settlement windows every 24 hours. Operations are moving much more smoothly several times a day, as opposed to just once a day and then everything catches up. The ACH operators also have the ability to allow files to be picked up many times throughout the day in addition to those official settlement times,” she added.
Get Everyone Trained on What to Say
Credit unions need to be sure front-line tellers, call center employees and other customer service areas are able to correctly answer member questions about how quickly they can send and receive money, Estep said.
“Implementation for Same Day ACH credits last September went so smoothly,” Estep said. “There really were not hiccups anywhere throughout the country that caused issues. For that reason alone there may be a tendency to be complacent as we now get to phase II.”
NACHA recommended that credit unions connect with their ACH operators, vendors and processors to test their systems across multiple days. Credit unions should also test posting all the way through their various transaction platforms and downstream applications, as well as test originating and receiving debit returns. Balancing and reconciliation tests are also important, as is giving corporate members the chance to test as well, NACHA said. For more testing tips, visit the NACHA website.
Prepare to Get Ready Again
Sept. 15, 2017, isn't the last important date for the Same Day ACH transition. Phase III is coming, too. It kicks in on March 16, 2018, and will require financial institutions to make funds available from Same Day ACH credits to members by 5 p.m. local time instead of the end of the processing day.
Same Day ACH: By the Numbers
If history is any indicator, ACH business could pick up for credit unions and other financial institutions after phase II rolls out. Here's what NACHA said happened after phase I, according to its data for the first quarter of 2017:
13.6: Percentage increase in quarterly volume between Q4 2016 and Q1 2017 (11.7 million to 13.3 million transactions)
54: Percentage of Same Day ACH transactions that were direct deposit ($7.3 billion)
32: Percentage of Same Day ACH transactions that were business-to-business payments ($8.5 billion)
12: Percentage of Same Day ACH transactions that were person-to-person payments ($1.2 billion)
Two: Percentage of Same Day ACH transactions that were consumer bill payments ($700 million)