Same Day ACH, a newly implemented NACHA rule that was heard around the payments world Fri, Sept 23rd! Traditionally, when an ACH payment is processed, the money lands in the receiver’s account the next business day. NACHA, serving as the trustee of the ACH Network, has officially implemented a rule change that allows same-day transfer of funds via the Automated Clearing House (ACH).
NACHA reports that 99% of current ACH Network volume will be eligible for same-day processing as long as the transaction is not international and not over $25,000, as the only two restrictions. Payment processors like Cash Flow Solutions must be alert to the additional submission deadlines of originating depository financial institutions (ODFI): 10:30 am EST, with settlement occurring at 1 pm, and 2:45 pm EST, with settlement occurring at 5 pm.
Although the 2016 same day ACH rule is optional for originators, all receiving financial institutions (RDFI) must accept same day ACHs and post to their depositors by 5pm at the RDFI’s local time. The RDFIs are reimbursed 5.2 cents per transaction by the ODFI to offset the additional resources necessary for same day processing. Expect these fees to be passed on to the merchants (and consumers) using ACH payments.
As we know, new technology takes time to fully embrace, so the roll out for same-day ACH will be gradual, however, NACHA has researched the immediate business uses for same-day money movement and delivery, listing the top four payments:
Same-day payrolls – offers flexibility for late and emergency payrolls
Business-to-business payments – allows for a faster settlement of invoice payments
Expedited bills – enables consumers to make on-time payments on due dates
Account transfers – provides faster crediting when moving funds from one account to another
In the payments world, moving money faster is an advantage for many types of businesses, but it also carries a greater security risk due to the acceleration of processing. The window to transact funds is dramatically reduced with same-day ACH from the next business day to the current one. This means less time for transaction risk reviews by the RDFI, resulting in more opportunities for quick unauthorized withdrawals from unsavory individuals.
The challenge for a safer same-day ACH will be to validate account ownership and confirm customer identity before funds move between accounts. Risk can be mitigated using real-time validation and account owner authentication tools to confirm sender and recipient accounts. These methods are not full-proof, but they will dramatically improve customer experience and reduce costs associated with administrative problems and unauthorized transactions.
This is the first of three phases for NACHAs same day ACH rules. The Sept 2017 rule adds same day ACH debits and in Sept 2018 the rule requires RDFIs to provide funds availability by 5pm local time for same day ACH transactions. Our team at Cash Flow Solutions has been preparing for same-day ACH for a long time, integrating 18 years of proprietary financial data into validation and authentication products, which will significantly reduce risk for businesses who wish to move money during a real-time business day.