Have you ever wished you could move money between institutions faster than two days? Guess what – YOUR WISH WILL BE GRANTED! NACHA (The electronic payments association) has adopted a new rule to allow same-day ACH. Currently, most ACH settlement takes at least a day, if not two.
If your institution is an ODFI, you will be able to submit same-day files a couple of times a day. About 99% of current ACH transactions will be eligible for same-day. Deadlines will be 10:30 a.m. (EST) with settlement at 1:00 p.m. (EST), and 3:00 p.m. (EST) with settlement at 5:00 p.m. (EST). For same-day, they have proposed a 5.2-cent transaction.
So that’s the gist of it, but what does that mean to the industry?
Well, a few things…
1. We will really need look at fraud. Most ACH fraud systems depend on the lag in transmission to look at the ACH file and determine what might be fraud. Also, many CUs use the lag to contact a member and determine if the transaction is real. With a compressed window, there is no doubt in my mind there is a group of fraudsters right now somewhere rubbing their hands together (in a slightly evil way), planning ways to work with these windows. Your operations will no doubt have to change and there will be a reaction to this via technology.
For instance, does your fraud analytics partner have plans to add additional logic for same-day ACH transactions? That’s something I would look at closely. Not to mention the window for the fraudster grabbing the money from the remote FI is now shortened. Trust me, the fraudsters are watching this closely.
2. Home Banking ACH payee validation: Today, most online ACH systems utilize a pre-credit/debit methodology to validate that a member truly owns the account at the remote institution. This methodology involves sending a small transaction to the remote account and having the member report back the transaction to unlock the account. Currently, this takes two days.
So I ask… should it be done with the same-day transaction? It would definitely make the members happier. But would it also increase fraud? Something to ponder. Also, home banking platforms will have to be revised to support the cut off times. This revision will be a challenge, as members won’t be used to having a window for a payment.
3. Should you charge for same-day? Or at least only give it away to your premium members? Only charge for credits? This is an age-old question now complicated by the introduction of same-day and the charge for it.
4. How will this affect your payments strategy? Will bill pay slowly become obsolete as new faster payment channels emerge?
There is plenty to think about here and a short time in which to do it. Phase 1 is credits, but you can bet the bigger players are revving up their engines for this. And if they do, your members will want to see it at your shop. So talk to your online ACH providers and find out their plan soon!