By Sandra Sieputowski
In today’s environment, everyone wants things faster, including payments. By creating the option to move payments faster with Same Day ACH, financial institutions expand current ACH offerings, providing the choice to efficiently and cost effectively speed up payments for customers/members. This initiative will provide consumers with an option to the growing FinTech non-banking alternatives.
The industry is taking a phased approach to implement the new functionality:
Phase 1 September 23, 2016 Same Day ACH Credits
Phase 2 September 14, 2017 Same Day ACH Debits
Phase 3 March 16, 2018 Same Day Funds Availability
To ensure a smooth transition and to address regulatory changes the time to start preparing for Same Day ACH is NOW! BBN has prepared some Best Practices to assist clients with the ACH changes that will go into effect on September 23, 2016.
It is important to keep in mind that the format of the ACH files is not changing. Only the settlement of the transaction is impacted by Same Day ACH.
Co-Mingled Files No Longer Accepted
If you currently receive co-mingled ACH incoming files you should begin transitioning away from a single “Combined” Incoming ACH file to receiving “Individual” Incoming ACH files. Taking this step now will help to ensure there is ample time to make adjustments to schedules, timing, staffing, customer expectations, etc. within your daily operations. If you do not use BBN to receive ACH inbound files, you should also consider taking the same approach with your core processor to be sure they too are ready to receive multiple files per day well ahead of the Same Day ACH deadline in September. Waiting to test or verify this ability in September is not recommended as this may be too short of a time frame to remedy any potential errors or obstacles.
Review and Update Documentation
Same Day ACH introduces new settlement rules and costs for Originating Depository Financial Institutions (ODFIs) and Originators. ODFIs should review and update their Originator / ODFI agreements to address Same Day ACH and costs associated with sending transactions Same Day. Revised agreement language regarding stale-dated ACH files could help educate the Originator and potentially mitigate risks to the ODFI if an Originator sends in a stale-dated ACH file. Customer/Member deposit account agreements should also be reviewed.
Receiving Depository Financial Institutions (RDFIs) are required to accept Same Day ACH files. Internal processes and procedures should be reviewed. This would include considering the potential that late day files could overdraw customer/member accounts, will returns be processed the same day, and is there a need for staffing changes. Customer/Member deposit account agreement should be evaluated to ensure compliance with process changes for RDFIs.
Impact of Stale Dated ACH Files
ODFIs should begin to identify and remedy stale-dated ACH files coming in from Originators and third party senders. “Know Your Customer” is critical in the Same Day ACH environment. Knowing if the Originator intends to send ACH items Same Day will help to alleviate unexpected costs associated with ACH processing.
Option to Not Offer Same Day ACH
An ODFI has the option to not offer Same Day ACH settlement to their Originators, financial institutions can instruct Originators and operations staff to wait until after 3:00 p.m. Eastern Time to click “send” on outgoing ACH files. ODFIs have until 2:00 a.m. Eastern Time to get next-day ACH items to the FRB.
Bulk ACH File Delivery
BBN has the capability to offer clients the option to sign up for Bulk ACH file delivery to their core processors. The benefit of utilizing this feature is that the later incoming files will automatically be sent to the core processor without needing to staff for these later files. This feature can be implemented today
Changes to STARS Platform
Same Day ACH processing will introduce two new Fed processing windows.
The Federal Reserve has published its’ Same Day ACH settlement windows and deadlines:
- Forward Same Day Payment
- 2:00 pm ET input file from (ODFI)
- 4:00 pm ET output file to RDFI
- 5:00 pm ET settlement of forward payments
- Same-day Return of FedACH Same Day Service Payment
- 4:30 pm ET input from returning DFI
- 5:00 pm ET output to receiving DFI
- 5:30 pm ET settlement of returned Same Day payments
STARS access times should be reviewed to accommodate later day activities.
Later settlement windows will require all financial institutions to once again review account balance requirements to avoid unintended daylight overdrafts either at BBN, the Federal Reserve or at your correspondent bank.
BBN is in the process of working with our service partner to ensure appropriate processing changes within the STARS platform are in place to maintain client efficiencies and compliance with regulations. By working together, we will successfully complete the upcoming changes to ACH processing with no disruption to your institution or your customers/members.