fifth third bank | all rights reserved faster payments in the u.s. same day ach / faster payments /...
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Faster Payments in the U.S.Same Day ACH / Faster Payments / Real-time Payments
September 2015
William K. Grace
Vice President, Senior Product Manager
Payments and Commerce Solutions, Fifth Third Bank
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Payments Industry Overview
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Payments Industry Overview – Driving Forces
Mobile1
Consumer Behavior2
Vertical Integration7
Payment Disruptors5
Technology / Innovation4
Faster Payments6
Generational Influence3
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Payments Industry Overview – Five Forces
• FI and Non-FI Players• Price CompressionCompetition
• Low Barrier to Entry• New Entrants WeeklyNew Entrants
• Virtual Currencies• Traditional PaymentsSubstitution
• Payments = Commodity• Changing Landscape = OpportunitySeller
• Many Choices Available• Sellers Buying BusinessBuyer
HIGH
HIGH
MODERATE
MODERATE
LOW
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Payments Industry Overall Attractiveness
Target = Starbucks, Amex, Shopkicks Mobile Apps1
Home Depot = Ebay’s New Point of Sale System2
Apple = VeriFone and Square7
UPS = USAA Partnership with Remote Capture5
Walgreen’s = Selling Square’s Mobile Reader4
Walmart = GreenDot6
Girl Scouts = Intuit’s GoPayment3
7 Retailers Changing the Payments Industry
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Faster Payments - Initiatives
SOURCE : American Banker, March 30, 2014 / The Road to Faster Payments
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Same Day ACH
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© 2015 NACHA — The Electronic Payments Association. All rights reserved.No part of this material may be used without the prior written permission of NACHA. This material is not
intended to provide any warranties or legal advice and is intended for educational purposes only.
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Why Same Day ACH?
• Same Day ACH is an immediate step we can take to enhance the payment system, demonstrating that financial institutions can work together to advance payments.
Same Day ACH creates a foundation on which to build other services.
Strategically:
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Why Same Day ACH?
Responding to Market Needs:
• 71 million ACH payments are made every day
• Same Day ACH creates an “option”– The choice of a premium service to make a payment faster.
• Support desires of your bank customers or credit union members
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Complimentary – Same Day & Real-time Payments
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Same Day ACH• Improved online billpay• Hourly payroll and Emergency
Payroll• Expedited B2C (e.g. insurance
payouts)• Cash management• Faster B2B• Accelerated card merchant
settlement
Real-Time Payment• P2P• Urgent A2A• Immediate billpay with
acknowledgment• Temporary payroll• Emergency B2C (e.g. disaster)• Just-in-time B2B
Type of Payment Credit or Debit Credit Only
Notification to Receiver Same-day (receipt of transaction) Immediate
Other MessagingExtensive remittance data can be
included with paymentReceiver acknowledgment, request for payment, remittance data, others TBD
Payment Finality Reversals and Returns Allowed Payment Certainty for Receiver
Receiver Availability Same-day “Immediate”
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What is Same Day ACH?
The ACH Operators will offer two new same-day ACH processing windows1
— A morning window at 10:30 a.m. ET, with settlement occurring at 1:00 p.m.
— An afternoon window at 3:00 p.m. ET, with settlement occurring at 5:00 p.m.
ODFIs will be able to submit files of same-day ACH payments through two new clearing windows that can reach all RDFIs in the ACH Network.
All RDFIs will receive Same Day ACH payments
RDFIs will make funds available from ACH credits (such as payroll Direct Deposits) to depositors by 5:00 p.m. local time.
A “Same Day” fee paid from the ODFI to the RDFI would provide, on average, recovery of implementation and operating costs, plus a reasonable rate of return, for RDFIs to enable Same Day ACH.
Existing one-day and two-day ACH processing and settlement capabilities will not be impacted
1Times are estimates; exact schedules and timing will be determined by each ACH Oerator
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What Is Same Day ACH?
What Transactions Will Be Eligible for Same Day ACH?
Virtually all ACH transactions, including credits and debits, will be eligible for same-day processing
Non-monetary transactions – prenotifications, notifications of changes, zero-dollar remittance information transactions, etc. – will also be eligible for same-day processing
International transactions (IATs) and large-dollar transactions over $25,000 will not be eligible for same-day processing
– Dollar limit is per-transaction, not per-batch
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How Will Same Day ACH Be Implemented?
Functionality Phase 1Sept. 23, 2016
Phase 2Sept. 15, 2017
Phase 3March 16, 2018
Transaction Eligibility ($25,000 limit; IAT not eligible)
Credits only Credits and debits Credits and debits
New Same Day ACH Processing Windows
10:30 am ET and3:00 pm ET
10:30 am ET and3:00 pm ET
10:30 am ET and3:00 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 and5:00 pm ET
ACH Credit Funds Availability
End of RDFI’s processing day
End of RDFI’s processing day
5:00 pm RDFI local time
Same Day ACH will be implemented in phased approach to allow the industry to acclimate to a faster processing environment, as well as to ease the industry’s implementation effort
1Times are estimates; exact schedules and timing will be determined by each Operator
1
1
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Risk Management Considerations
Faster movement of money
— More frequent interbank settlement reduces counterparty risk
— Per-transaction dollar limit is a balancing act between mitigating risk and impacting use cases
Financial institution origination of Same Day ACH
— Which clients can send same-day ACH transactions?
— Credit limits
— How good is your authentication?
— Receiving returns faster
— Recovery for missed deadlines
— Faster reversals of erroneous transactions (i.e., duplicate file)
Financial institution receipt of Same Day ACH
— Risk review before posting ACH credits
— Late day receipt of ACH debits – NSF or bad account information
— Sending returns same-day
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Resources
NACHA Web site - https://www.nacha.org/content/same-day-ach
Implementation Checklists for
ODFIs
RDFIs
Originators and Third-Party Senders
Available for download:
https://www.nacha.org/rules/same-day-ach-moving-payments-faster