For years, credit union members have demanded a payment system that allows for quicker deposits and withdrawals involving their accounts. Members are tired of their employers ACH taking an extra day or two to deposit to their checking account when their ruthless rent payment is withdrawn, whether funds have arrived from their employer or not. If you have worked on the front line at your credit union, you've likely had multiple requests to reverse NSF fees for this exact reason.
In September 2016 same day ACH will become a reality. Many credit unions have questions how same day ACH will affect their operation and what changes to expect, if any, from companies providing payroll deposits and other originators. A survey conducted by the National Automated Clearing House Association (NACHA) this past February indicated that 95 percent of respondents will offer same day ACH by year-end. With that in mind, what will change for credit unions?
For starters, credit unions will not be required to use same day ACH payments, but they need to be prepared to receive them. Risk is a concern for many credit unions as well, the faster payments move, the greater likelihood of fraud. Having the right credit union data processing system in place with the right capabilities can help monitor the flow of transactions. There are benefits, originating credit unions or companies could replace wires with same day ACH payments since the time frame is identical and same day ACH transactions will be cheaper. This will allow credit unions that have accounts payable systems with integrated ACH origination the ability to pay their vendors the same day, if desired. Additionally, providing members and business account holders with institution-to-institution transfers from within Internet banking can be a selling point for credit unions. Credit unions are not only competing against other types of financial institutions - they are now competing against payment systems providers such as alias-based solutions that simply use an email or cell phone number to circumvent traditional payment methods.
Don't expect a stampede into same day ACH. Same day ACH is new, and with anything new it will require time for businesses to integrate into their procedures and practices. Credit unions will be less concerned about the speed of pay and more concerned about the certainty of pay, there will most likely be a 'learning curve' as procedures are established to verify information and remove paper from the process. NACHA’s survey suggests payroll and business-to-business (B2B) payments are the uses expected to be most popular, with 100 percent of the banks surveyed planning to provide same day payroll payments and 95 percent planning to offer same day B2B payments.
Ultimately, same day ACH is part of a growing platform of payment options that represent progress towards faster payments. This is a step in the right direction to ensure the U.S. remains competitive in a payments system that is experiencing global change. In order to deliver a smooth transition to the new same day ACH rules NACHA has decided to implement the same day ACH in three unique phases.
Phase 1: effective September 23, 2016, only includes credits with funds available by the end of the receiving financial institutions' day.
Phase 2: effective September 15, 2017, includes debits and credits with funds available by the end of the receiving financial institutions' day.
Phase 3: effective March 16, 2018, includes debits and credits but requires the receiving financial institution to have the funds available by 5:00 PM local time.
While the implementation of these three phases may appear daunting, the better you understand the new same day ACH regulation the less you will fear it. Remember, scientia potentia est or knowledge is power.
