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Continuing Impacts of Same Day ACHDigital Banking & Digital Payments

May 23, 2017

Business Digital Product Management

Session Agenda

Goals for today’s session

• Overview of the rule change: what do we all need to know?

• Where are we at so far?

– Impact of Phase 1

– Completed changes

• Continuing FIS Digital Banking plans

– Digital Banking general approach

– Online Banking plans

– Business eBanking plans

• Client considerations

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Days Until

Phase 2!

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The new Same Day ACH Rule

provides a ubiquitous same-

day clearing and settlement

capability for virtually all

ACH Payments

NACHA.org Same Day ACH Resource Center

Same Day Rule Change Highlights

• Change timing:

– NACHA Rule changes approved May 2015

– Federal Reserve Board approved 9/23/15

– Phased rollout

• Stepping stone to payment modernization

– Movement to accelerate payment and settlement

• Available to:

– Consumers

– Businesses

– Governments

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So Far … NACHA Survey Summary

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• 100% of survey respondents – NO INCREASE in fraud due to Same Day ACH

• Volumes from ORIGINATORS

– Volumes were as anticipated: 55%

– Volumes were HIGHER than expected: 35%

• Volumes for RECEIVERS

– Volumes were as anticipated: 61%

– Volumes were HIGHER than expected: 22%

• 80% of respondents expect steady growth over next 6-9 months

December 2016/January 2017 NACHA Survey (23 financial institutions comprising nearly 2/3 of Same Day ACH Origination)

Reported success stories

involving support for

PAYROLL %

So Far … NACHA Survey Summary

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Business customer usage

Same Day ACH being used by businesses of all sizes

Payment types

• Payroll: 95%

• One-time: 68%

• Regular: 58%

December 2016/January 2017 NACHA Survey

(23 financial institutions comprising nearly 2/3 of Same Day ACH Origination)

Middle Market

Large Business

Small Business

So Far … Business eBanking Adoption

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Utilization of Same Day ACH Origination in Business eBankingAs of February 2017

Enabled

Not Enabled

Banks with Credit Origination Enabled

PPD PAYMENT

CCD PAYMENT

CTX PAYMENT

STP 820 PAYMENT

CHILD SUPPORT PAYMENT

OTHER

Services Enabled

So Far … Business eBanking Adoption

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Utilization of Same Day ACH Origination in Business eBankingYTD as of February 2017

Actual transactions originated

• Only PPD and CCD

Concentration

• One FI initiates 50% of all BeB volume

• Next five account for 27%

• Remaining are small numbers

PPD

CCD

Actual Origination Transaction Activity

So Far … Online Banking Adoption

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Utilization of Same Day ACH Origination in Online BankingYTD as of April 2017

Actual transactions originated

• 55% of banks enabling Same Day origination are

seeing actual customer usage

Concentration

• One FI initiates 70% of all OLB volume

• Next most active accounts for 23%

• Remaining are very small numbers

Enabled

Not Enabled

Banks with Credit Origination Enabled

Overview of the Rule Change

Same Day ACH


1. Same Day Rule is being implemented in three phases.

• RDFI – All banks are required to accept and post Same Day payments

• ODFI – Originating Same Day transactions are not mandatory

• ACH Operator – Fed and EPN will accept, route, and settle Same Day payments

Introduced in 3 phases:

• Phase 1 – effective 9/23/16 – COMPLETE

• Phase 2 – effective 9/15/17

• Phase 3 – effective 3/16/18

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2. Same Day ACH implementation phasing:

Impacts:

• Market adapting to transaction posting deadlines vs. settlement to the FI.

• Transaction eligibility is a new concept for ACH – Previously everything from a batch carries the same settlement date;

now there is another level of interrogation.

Activity Phase

Same Day Transaction Posting Deadlines Phase 1-2: By bank’s EODPhase 3: By 5:00 pm “local time”

Same Day Operator Settlement All Phases: Settlement to FI at 1:00 ET and 5:00 ET

Same Day Transaction Eligibility All Phases: IAT batches and transactions over $25K are ineligible

Phase 1: Only credits transactions are eligiblePhase 2-3: Debits are eligible

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3. ODFI’s pay RDFI’s 5.2₵ per Same Day network transaction.

How it works:

• ACH Operator (Fed) serves as the ‘billing agent’ for the Same Day transaction fees.

• These fees are independent of processing Operator (Fed) fees. The Operator does not take any portion of that 5.2₵ fee.

• ACH Operator bills on a MONTHLY basis to the DFI Operator account.

• Posting two entries monthly. (a) Net fees charge as the ODFI (b) Net fees paid for same-day receiving transactions.

• FIS is not involved in this process – it is managed by the ACH Operators.

Impacts:

• Provides revenue to RDFIs for having to support initiative.

• ODFIs have to be mindful of their Same Day activity since it will be charged this fee.

• On-us transactions that stay in-house will not be part of the charge as they are not network transactions.

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4. New processing deadlines effective September 23, 2016.

Impacts:

• Banks should review their origination deadlines if they want to participate in Same Day for debits.

• There is no unique method to identify same day transactions from forward transactions except for by the assigned settlement date (Julian Date) when received for external items.


Send to Fed Description Comment

10:30 am ET First Same Day Origination deadline Operator settles to FI account at 1:00 pm EST

2:45 pm ET Final Same Day Origination deadline Operator settles to FI account at 5:00 pm EST

Send from Fed Description Comment

Noon ET First File Containing Same Day entriesA posting file is required from this file

Fed commingles Same Day and forward entries in file

4:00 pm ET Last file with Same Day entries A posting file is required from this file

Fed commingles Same Day and forward entries in file

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5. There are no unique triggers for ACH originators using Same Day.

There are three things that ACH Operator interrogates to determine if a Same Day settlement date is assigned

to a transaction.

Impacts:

• Banks may incur the $.052 fee for unintended Same Day origination.

• It will be difficult as a RDFI to identify the Same Day entries when looking historically.


1 Batch received prior to Same Day deadline To Operator by 2:45 pm EST

2 Batch was eligible for Same Day - Effective date is today or prior.- Batch is not an IAT

3 Transaction is eligible for Same Day - Entry is below $25,000- Entry is a credit (Phase 1)

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6. Fed opened a later returns window to enable Same Day returns.

How it works:

• There is an additional return window later in the day

• Settled transactions may be returned by the receiving institution and get it into this later window to receive settlement today

for that return and deliver back to the bank

• The transaction does not have to be a Same Day transaction to use this window

– There are no eligibility restrictions such as IAT or over $25,000

Impacts:

• Market initially assumed this window was only for Same Day entries, but it is open for all returns

• Places pressure on core systems to provide pre-post capabilities or early non-post decisions

• Banks are concerned with their ability to properly fund their Fed accounts given the later settlement times.

• It is difficult to know if the transaction truly settled yet unless you are the ACH Operator


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Same Day ACH Benefits

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Key Benefits

– Consumers: more control over cost and timing of payments

– Businesses: lower cost, ubiquitous payment and collection capabilities

– Leverage existing infrastructure to faster payment model

Consumer Billing

• Due date/late payments

• Payments to prevent loss of service

• Any bill payment in which credit is

given immediately

• Any bill payment in which non-payment

risk is elevated

Check Conversion• Merchants

• Lockboxes

Collections

Individual Account Transfers

Business to Business

• Just-in-time payments for release/ shipment of goods

• Invoice due date / late payments

Plans for Same Day ACH

FIS Digital Banking and Digital Payments

General Approach

FIS Digital Banking Plans

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Phase 1 – effective 9/23/16

• Enable financial institutions to selectively offer Same Day ACH Origination in 2016

– Credit origin only for eligible payments under $25,000

– Leverage existing capabilities

– Enable restriction of same-day effective dated transactions

– Targeted enhancements to customer-facing digital solutions

• Support core banking system changes

– Restrict Same Day activity to entitled customers

– Reporting and inquiries on Same Day ACH credits received

• Support FIS ACH processing solutions

COMPLETE

General Approach


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Phase 2 – effective 9/15/17

Enable financial institutions to selectively offer Same Day ACH Origination

• Support credit and debit origination

– For eligible payments under $25,000

– Expand on existing Same Day capabilities

– Enable restriction of same-day effective dated transactions

• Enhance ACH Positive Pay to support Same Day ACH activity

Online Banking


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Phase 1 – 9/23/16

• Online Banking changes to enable financial institutions to support Same

Day ACH origination

– FIS OLB supports same day ACH origination through file upload and batch templates in

2016 (this includes both Debits and Credits)

– OLB allows the use of a current day effective date by company.

COMPLETE

Online Banking


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Phase 1 – 3/26/17

• Extended support options added in 2017 in advance of Phase 2

– Cut off timing

– Batches

– limits

• Online Banking support for a same day indicator in a batch in 2017

COMPLETE

Business eBanking (BeB)


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Phase 1 – 9/23/16

• Business eBanking changes to enable financial institutions to support

Same Day ACH origination

– ACH File Upload feature

Financial institutions can control same day effective dating in the BeB ACH File Upload feature

– Bank Level

– Company Level

Existing feature will enable the financial institution to enable or prevent the upload of Same Day

ACH files

Changes will not be made to Billing, BIC, Entitlement, etc.

COMPLETE



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Phase 1 – 10/23/16

Business eBanking Q4 Release - Expanded ACH Credit Origination

• Continue to leverage existing configuration settings for File Upload

• Add ability to enable Same Day ACH credit origination for ACH Templates

– Change min max day to zero

– Add control for Same Day cut-off time

• Add transaction level billing for ACH credit

• Enhance Prenotes for next day effective date

COMPLETE



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Phase 2 plans – 10/22/17

• Prevent “accidental Same Day” for External

Transfers (June 2017)

• Enable debit origination

– ACH File Upload

– ACH Templates

• Enhance ACH Positive Pay

– Real-Time Debit Block (Transaction Authorizer)

– Enable banks to manage same day debit activity arriving in later settlement windows

– Generate alerts for additional exceptions

– Enable FI to offer extended exception window

Client Considerations

Same Day ACH


Understand the rule changes and how they impact you

• Operational considerations

Expectations for receiving financial institutions

Availability and settlement consideration

• Competitive impacts and go-to-market strategy

Competitive value of participation in credit and debit origination for Phase 2

• Risk v. competitive advantage

• Complexity of service support

Educating and communication with customers

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Helpful resources

• FIS

– Communications throughout 2017

White Papers

Client Bulletins

– Your FIS Account Team

• NACHA

– Same Day ACH Resource Center

Fact Sheets, FAQs, Q&A Documents

Recorded webinars

Videos and other resources

https://www.nacha.org/content/same-day-ach-resource-center

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https://www.nacha.org/content/same-day-ach-resource-center

Business Digital Product Management

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