Preparing for Same Day ACH Debits

THE PAYMENTS INSTITUTE — July 16-19, 2017

Emory Conference Center Hotel, Emory University, Atlanta, Georgia

Preparing for

Same Day ACH Debits

Jen Wasmund, AAP, CTP, NCP

Vice President of

Education and Compliance

UMACHA

Sandy Ortins, AAP, NCP

Vice President

NEACH

Overview

• Same Day ACH basics

• Same Day ACH Phase 1 lookback

• Same Day ACH use cases

• Preparing for Same Day ACH

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Same Day ACH basics

Preparing for

Same Day ACH Debits

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#TPISchool 3

• Faster and more frequent settlement

options

• Credits live as of September 23, 2016

• Debits live on September 15, 2017

• Faster funds availability mandated by

March 16, 2018

What does Same Day ACH mean to participants

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What does Same Day ACH mean to participants


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Functionality Phase 1

Sept. 23, 2016

Phase 2

Sept. 15, 2017

Phase 3

March 16, 2018

Transaction Eligibility ($25,000 limit; IAT not eligible)

Credits only Credits and debits Credits and debits

New Same Day ACH

Processing Deadlines

10:30 AM ET and

2:45 PM ET

10:30 AM ET and

2:45 PM ET

10:30 AM ET and

2:45 PM ET

New Settlement Time(s) 1:00 PM ET and

5:00 PM ET

1:00 PM ET and

5:00 PM ET

1:00 PM ET and

5:00 PM ET

ACH Credit Funds

Availability

End of RDFI’s

processing day

End of RDFI’s

processing day

5:00 PM RDFI local

time

ACH Operator processing windows

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Transmission window Target distribution Settlement schedule

ACH Operators Forward-Future Dated Items

10:30 a.m. ET (1030 ET)

2:45 p.m. ET (1445 ET)

8:00 p.m. ET (2000 ET)

2:15 a.m. ET (0215 ET)

12 noon ET (1200 ET)

4:00 p.m. ET (1600 ET)

10:00 p.m. ET (2200 ET)

6:00 a.m. ET (0600 ET)

8:30 a.m. ET (0830 ET) – Next Business Day

ACH Operators Forward – Same Day Items

10:30 a.m. ET (1030 ET)

2:45 p.m. ET (1445 ET)


4:00 p.m. ET (1600 ET)

1:00 p.m. ET (1300 ET) – Current business day


ACH Operator Returns

10:30 a.m. ET (1030 ET)

2:45 p.m. ET (1445 ET)

4:00 p.m. ET (1600 ET)

8:00 p.m. ET (2000 ET)

2:15 a.m. ET (0215 ET)


4:00 p.m. ET (1600 ET)

5:00 p.m. ET (1700 ET)

10:00 p.m. ET (2200 ET)

6:00 a.m. ET (0600 ET)




8:30 a.m. ET (0830 ET) – Next business day

8:30 a.m. ET (0830 ET) – Next business day

• Eligible

– Entries of $25,000 and under

– Return Entries

– Most Standard Entry Class (SEC) Codes

– Non-Monetary Entries

• Not eligible

– Entries over $25,000

– International ACH Transactions (IATs)

– Automated Enrollment Entries (ENRs)

Same Day ACH eligibility


• Timing

– Entries must be received by an ACH Operator prior to the “Transmission Window” deadlines

– Applies for both forward and Return Entries

• Formatting

– Must be $25,000 or less

– Effective Entry Date field values that are the current business day, stale dated or invalid will be processed as Same Day Entries

Same Day ACH Mechanics


• Subject to the anticipated publication of a final 31 CFR Part 210 rule, the Treasury is committed to participating in Same Day ACH as of Sept. 15, 2017

– Beginning with the capability to receive tax and non-tax Same Day ACH credits

– Origination of EFTPS debits will be ready no later than October 2017

– Other Treasury programs will be adopting the capability later in the year and into 2018

Federal Government participation in Same Day


• Each forward Same Day ACH Entry (not

Return) is assessed a fee of $0.052

• Paid directly from ODFI to RDFI via

monthly ACH Operator statements

• Fee is scheduled to be reviewed per

Appendix Eleven five years after Phase 3

Implementation on March 16, 2018

The economics of Same Day ACH


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• If volume exceeds expectations by greater

than 25% of projections, the Same Day

fee may be reduced

The economics of Same Day ACH


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Same Day ACH Phase 1 lookback

Preparing for

Same Day ACH Debits

• Live on September 23, 2016

• Results published for October 2016 and

for all of 2016

• Feedback from industry has been

generally positive

• What did we learn?

Phase 1…what did we see?


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October 2016 Same Day ACH Volume


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2016 Same Day ACH Volume


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• From the first full month of adoption

throughout the remainder of 2016,

average daily transactions increased

• Direct Deposit via ACH while representing

the highest percentage of transactions, did

not represent the highest volume of dollars

transferred in either period

Phase 1…what did we see?


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• Of 23 institutions surveyed, who represent

nearly 66% of Same Day ACH volume

originated

– 100% reported no increase in fraud

– 35% saw higher origination volume than

anticipated

– 80% expect Same Day ACH volume to grow

at a steady rate over the next six to nine

months

Phase 1 and the truth from the market


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Same Day ACH use cases

Preparing for

Same Day ACH Debits

Where will Same Day ACH volume come from?


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62%15%

10%

7%

4%

1%

1%

More than 60% of Same Day ACH volume is estimated to come from existing ACH by 2027

Next Day ACH

Cash

Card

Check

Other

Online Banking & Bill Pay

Wire

Projected breakdown by Same Day ACH type


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39%

26%22%

13%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

C2B C2C B2B B2C

C2B uses cases expected to drive around

39% of Same Day ACH volume by 2027

Business and consumer uses


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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

• Debit use cases– Bill payments

– Check conversion

– Collections

– Vendor payments

• Benefits – Faster settlement

– Reduces credit risk

– Increases collection rate

– Speeds up returns

– Reduces NSF returns

Same Day ACH debits use cases


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• Error corrections

– Faster reversals of erroneous debits and

credits

– Re-initiate correct payments faster

• Contingency

– Meet payroll cycles during an emergency

– Off-cycle payments

Same Day ACH for contingency purposes


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Preparing for Same Day ACH

Preparing for

Same Day ACH Debits

• It’s optional

• Find out your ODFI’s enrollment requirements

• Learn your bank’s origination deadlines

• Ensure proper use of effective entry date field

• Identify which payments will be sent Same Day

• Identify ineligible payments

• Consider sending a wire if funds are needed in real time

Same Day ACH debits checklist


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Originators

• It’s optional

• Consider enrollment requirements

• Consider Company Descriptive

Date as a required field

• Determine how you will identify

Same Day ACH transactions

• Communicate to your customers

• Know the ACH Operator

deadlines



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ODFIs

• It’s not optional

• Will start receiving debit entries

• Recognize Same Day ACH

payments by the Settlement Date

field

• Need to provide end-of-day funds

availability to account holders who

receive Same Day ACH credits

• Can choose to send Same Day

returns



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RDFIs

• It’s not optional

• Know funds availability

• Need to update your records to

indicate customer’s payment date

• Cash forecasting for controlled

disbursement accounts

• Consider updating online and

telephone systems to allow

customers to make Same Day

ACH payments



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Receivers

• What questions do you have?

Questions


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Documents

Preparing for Same Day ACH Debits