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ACH: Now and Next
Andrée E. Ortega, AAP, CTP
VP, ACH Product Manager, Wells Fargo
April 19 & 20, 2018
© 2018 Wells Fargo Bank, N.A. All rights reserved. For public use.
1
Recent changes to the NACHA Rules
Session overview
Faster Payments:
Same Day ACH / Real Time Payments1
2
What’s next?3
Faster Payments
3
Faster payments definition
Payments in which the transmission of the payment message and the availability of the final funds to the payee occur in real time or near-real time and on or as near to a 24-hour and 7-day (24/7) basis as possible.
Source: “Faster Payments—Enhancing the peed and availability of retail payments”, Committee on Payments and Market Infrastructure, Bank for International Settlement, November 2016
Countries with 24/7 retail RTP systems that are live or in development
• Mexico – SPEI (2004)• Chile – TEF (2008)• Brazil – SITRAF (2002)• Sweden – BiR (2012)• Denmark – Nets (2014)• U.K. – Faster Payments (2008) • Poland – Express ELIXIR (2012) • Nigeria – NIP (2011)• South Africa – RTC (2006)• India – IMPS (2010)• South Korea – HOFINET(2001)• Singapore – FAST (2014)• Australia – NPP (2017)• United States – RTP (2017 )• EU – SEPA Instant (2017)• Colombia – TBD • Thailand – TBD
Systems in Development / Public Consultation
Current 24/7 Retail RTP Systems
MEXICOSPEI
UKFaster Payments
AUSTRALIANew Payments Platform
POLANDExpress ELIXIR
SWEDEN
BiR
SINGAPOREFast and Secure Transfers
SOUTH KOREA HOFINET
INDIA
IMPS
SOUTH AFRICA
RTC
NIGERIANIP
BRAZILSITRAF
CHILETEF
UNITED STATES
RTP
EUSEPA Instant
DENMARKNETS
COLOMBIATBD
THAILANDTBD
Faster payments – a global trend payments – A global trend
Source: The Clearing House, 2016
5
Drivers for faster payments
Advances in information technology including the spread of advanced mobile communication devices
Altered end user expectations for speedier and more convenient payments
Action by authorities including some central banks to improve payment system capabilities
Same Day ACH
77
NACHA Same Day ACH service
Approved May 19, 2015
Mandatory for all receiving depository financial institutions
Not all transactions will be eligible for Same Day ACH
Will be implemented over 3 years
– September 2016 (Phase 1): Credits
– September 2017 (Phase 2): Debits
– March 2018 (Phase 3): 5:00 p.m. funds availability
Source: 2018 NACHA Operating Rules & Guidelines
88
What transactions are eligible for
Same Day ACH?
Credits and debits
Non-monetary transactions
Returns
On-Us transactions more than $25,000
Transactions greater than $25,000
International transactions (IAT and domestic IAT)
Eligible Not eligible
99
A phased approach
September 23, 2016
Phase 1
Same Day credits
Wells Fargo same dayprocessing deadlines at 8:00 a.m. and noon Central Time
Funds available by the end of the processing day
September 15, 2017
Phase 2
Same Day debits
Wells Fargo same dayprocessing deadlines at 8:00 a.m. and noon Central Time
Funds available by the end of the processing day
March 16, 2018
Phase 3
New credit fundsavailability time
Wells Fargo same dayprocessing deadlines at 8:00 a.m. and noon Central Time
Funds available by 5 p.m. RDFI local time
The Clearing House (TCH)
Real Time Payments Service
11
RTP distinctive features
Payment Status
Immediate notification of successful transfer to end users, providing certainty for both senders and receivers
Payment Certainty
Receivers have certainty that payments will not be reversed or revoked
Credit Push Only
Request for Payment
To support funds request, e-invoicing or e-billing
Global Ready
Immediate Availability of Funds
Fulfillment Messaging
Ability to provide confirmation by the receiver that they have received funds, combined with fulfillment information
Receivers have funds available in real-time 24/7/365
Customers send payments directly from their existing accounts – complete transparency, no pending payments
ISO 20022 is a global standard that supports the needs of multi-national customers and will enable cross-border payments in the near future
Complete AR/AP Messaging
Ability to link multiple messages associated with the same transaction through a common reference. Allows development of Value added services based on extensible data
1212
RTP use case: just-in-time invoicing and payment
Large Supplier
Small Business Buyer
Payment
Request for Payment (with link to invoice)
E-invoice Product
Cash Management Workstation
Online Banking Payments
Real-time Receivables
Logistics Integration Mobile Banking
Alert
Receiver Confirm (link to shipping info)
Small Business Banking
Treasury Management
1313
RTP use case: bill payment reminder and
payment
BillerConsumer Bill Payer
Payment
Electronic Bill (Request for Payment)E-billing
Real-time Receivables
Confirmation
Consumer Mobile
Banking
Treasury Management
Mobile Presentment –
“You have a new bill”
“Pay Now” or “Schedule Payment”
“Payment received for
account # xxxx”
Recent changes to the
NACHA Rules
15
Third-Party Sender defined
Article Eight, Section 8.106, “Third-Party Sender”
– a type of Third-Party Service Provider that acts as an intermediary in Transmitting Entries between an Originator and an ODFI, including through Direct Access, and acts on behalf of an Originator or another Third-Party Sender. A Third-Party Sender must have an Origination Agreement with the ODFI of the Entry. A Third-Party Sender is never the Originator for Entries it Transmits on behalf of another Organization. However, a Third-Party Sender of Entries may also be an Originator of other Entries in its own right.
Source: 2018 NACHA Operating Rules & Guidelines
16
Third-Party Sender rule
Approved August 18, 2016
Requires every Originating Depository Financial Institution (ODFI) to either register its Third-Party Sender (TPS) customer(s) with NACHA, or provide to NACHA a statement that it has no such customers
Effective September 29, 2017
Implementation period ran through March 1, 2018
17
What information is required for Third-Party
Sender registration?
ODFI’s name and contact information
Name and principal business location of the TPS
ODFI’s routing numbers used in ACH transactions originated for the TPS
Company Identification(s) of the TPS
DBA names, taxpayer ID(s), street address(es) and website address(es) of the TPS
Name and contact information for TPS’s contact person
Names and titles of the TPS’s principals
Approximate number of Originators for which the TPS transmits entries
Statement as to whether the TPS transmits debit entries, credit entries or both
Initial Registration Supplemental Registration
What's next?
19
Same Day ACH expansion
Add a third Same Day ACH processing window that expands access to later in the day
Provide faster funds availability to receivers of both Same Day and non-Same Day ACH credits
Raise the per-transaction dollar limit on Same Day ACH transactions to $100,000
Source: 2018 NACHA Operating Rules & Guidelines
20
Weekend and holiday processing
Explore the industry’s interest in ACH processing on weekends and holidays
Potential benefits and impacts from the availability of ACH processing on weekends and holidays
Feasibility of exchanging ACH transactions on weekend and holidays
21
ACH message entries
Exchange non-monetary messages between financial institutions
– 2017 request for information - “DFI to DFI Messaging”
– Request for comment due April 27, 2018
Financial Institutions would use new non-monetary ACH Message Entries with a new SEC Code of “MSG”
– Record of Authorization
– Source Document (converted check) copy
– Written Statement of Unauthorized Debit copy
– ODFI-requested returns
– Additional information related to an Originator
– Trace Request
222222
Questions?
23
Additional resources and information
NACHA linkhttps://www.nacha.org/news/nacha-announces-approval-rule-establishes-third-party-sender-registration-requirements
The information and opinions expressed in this document or for informational use only and are not intended to be comprehensive, nor do they constitute legal advice. Please seek legal or other professional advice before acting or relying on any of the content in this presentation.
242424
Appendix
2525
Same Day ACH business and consumer
use cases
Emergency payrolls
Hourly workers
Insurance claims
Refunds
B2C
Vendor payments
Tax payments
Payments to release goods or provide services
B2B
Consumers can make bill payments on their due dates
Faster credit for late payments
C2B
Consumers can move money between accounts
Person to Person payments
C2C
2626
Same Day ACH versus Wire Transfer
Feature ACH Wire
Normal useLow value/high volume transactions
High value/low volume transactions
Processing Batch Individual transactions
Transaction limit $25,000 $9,999,999,999.99
Network delivery Twice a day Real time
Funds availability 5:00 pm RDFI local time Immediate
Transaction costLow dollars (plus transmission fee)
Higher dollars
Typical deadlines 10:00 a.m. Pacific Time 2:30 p.m. Pacific Time
Remittance information
CTX 9,999 addenda records (799,920 characters)
Up to 9,000 characters (may require special processing)
2727
Getting started with Same Day ACH as an
originator with Wells Fargo
Opt-in with your ODFI for the premium service
Use same day effective date in Batch Header records
Meet origination deadlines
– 8:00 am Central Time
– Noon Central Time
Change your ACH files
Re-test your ACH files
Update agreements
What has to happen? What you don’t need to do
2828
Preparing for Same Day ACH as a receiver
Review when incoming ACH information is currently received to determine if timing needs to change to capture Same Day ACH
Provide vendors/trading partners with account restrictions related to Same Day ACH
− Receiving account is a Controlled Disbursement account so ACH debits should not be sent on a same day basis and underfund the account
− If funds are needed immediately (i.e. to close a deal, release goods, etc.) a wire transfer should be sent instead of a same day ACH credit
Review receivables updating procedures to ensure funds are shown as having been received on the actual effective date (especially if discounts are given/late fees assessed)
Determine if you want to offer consumers the option to pay their bills on a same day basis, most likely a TEL or WEB initiated entry
Key Considerations
2929
Same Day ACH Final considerations
Must update records to reflect customer’s payment as having been received as of date no later than Settlement date
Rules allow a reasonable amount of time to update records
Do you want to offer options for same day to your consumer customers
Must inform/remind receiver of same day transaction
RDFIs will not be required to return transactions on the same day they are received - current Return Rules apply
Returns will be permitted to be processed through the two new same day windows
Are there IT concerns, such as assigning of effective date, using same day for some but not all batches, timing, etc.
As a receiver… As an originator…
3030
Third-Party Sender initial registration
ODFIs required to provide initial, basic registration information within 30 days of originating the first ACH entry for their customer
When an ODFI becomes aware of an unregistered TPS, the Rule provides a 10 day grace period to register that customer
ODFIs required to update registration information within 45 days following any change to the information previously provided, including whether the TPS relationship has ended
In order for TPS’s to be aware of these requirements, ODFI’s will need to notify their TPS customers of the rule and how it applies to them
3131
Third-Party Sender initial registration
Registration requirement applies to:
– TPS that are ODFI’s direct customers
– TPS that are direct customers of the first TPS, otherwise known as “nested” TPS
Obligates TPS to provide their ODFIs, upon request, with any registration information needed
Requires TPS’s to disclose to their ODFIs any other TPS’s for which they transmit ACH entries
3232
Third-Party Sender supplemental registration
Upon receiving written request from NACHA, an ODFI will be required to provide the supplemental registration information within 10 banking days
NACHA will be authorized to request this information regarding risk events, which the Rule defines as:
“cases in which it (NACHA) believes that a Third-Party Sender in the ACH Network poses an escalated risk of (i) financial loss to one or more Participating DFIs, Receivers or Originators, (ii) violation of the Rules or applicable Legal Requirements, or (iii) excessive Returns.”
3333
Third-Party Sender registration participants
May incur direct costs to assemble and report required information and update registration information on a periodic basis
Should already have record of existing TPS customers
May require enhancements to their customer onboarding and monitoring processes
ODFIs with no TPS customers must provide NACHA with:
– ODFI’s name
– name, title, telephone number, email address, and street address for a contact person at the ODFI
– statement acknowledging that the ODFI has no TPS’s
Audit requirements
Originating Depository Financial Institutions
3434
Third-Party Sender registration participants
May incur direct costs to assemble and provide required information to their ODFIs
Upon ODFI’s request, TPS’s must provide any information the ODFI reasonably deems necessary to identify each Originator for which the TPS transmits entries
– Must be provided to the ODFI within two banking days of receipt of the ODFI’s request
– May differ from ODFI to ODFI
Must disclose to the ODFI any other TPS for which it transmits entries to the ODFI, prior to transmitting entries for the other TPS
Audit requirements
Third-Party Senders
3535
Third-Party Sender registration participants
Not expected to incur any direct costs associated with Third-Party Sender Registration
Originators, ACH Operators, and RDFI’s
3636
Third-Party Sender rule enforcement
NACHA could initiate a Rules enforcement proceeding if it believes that an ODFI has failed to register a Third-Party Sender customer
NACHA recognizes that there might be situations in which a NACHA risk investigation identifies an entity as a Third-Party Sender, but its ODFI is not aware that the entity is a Third-Party Sender that should be registered
– NACHA’s risk investigation staff will advise the ODFI, in writing, that it must register the Third-Party Sender within the 10 banking day grace period
– Failure of the ODFI to register the Third-Party Sender could then result in the initiation of a Rules enforcement proceeding