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Nathan Ottinger
Senior Vice President, Payments Industry
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Come gather 'round people
Wherever you roam
And admit that the waters Around you have grown And accept it that soon You'll be drenched to the bone If your time to you Is worth savin' Then you better start swimmin' Or you'll sink like a stone For the times they are a-changin' - Bob Dylan
Last week, NACHA, the governing body of the US ACH system, approved a proposal to move forward with Same Day ACH settlement. The utilization of a same-day ACH process has been discussed for the past 20 years and is now officially upon us. For an overview of the new Same Day ACH rule and to learn more, visit NACHA's website.
Some highlights of the new ACH rule are as follows: - All banks in the US will move from one end-of-day ACH settlement time to three intra-day settlement windows. This will allow for ubiquity of settlement across US banks and speed the flow of payments from an overnight settlement system to an intra-day settlement system.
- Same Day ACH will roll out in three phases:
- Phase 1 (September 2016) - Same-day ACH credits
- Phase 2 (September 2017) - Same-day ACH debits with a max limit of $25k per debit
- Phase 3 (March 2018) - Same-day availability by 5:00pm local time by receiving bank
Same Day ACH will have meaningful effects for the payroll industry, including some tangible benefits for both the industry and your clients: - Faster timing and processing for hourly payrolls. This will be a significant benefit for your clients that have large hourly staffs or staffs that work late-night shifts.
- The allowance for same-day payrolls if a client forgets to submit the payroll information under current submission times.
- Quicker response for new employee direct deposits.
- The ability to offer same-day impound and same-day disbursement of direct deposit as an enhanced service for credit-worthy clients.
Despite the benefits, there are some things for payroll service bureaus to keep in mind, including: - Same-day settlement is not the same as "real-time" settlement. The ACH system will continue to be a batch processing system, with Same Day ACH allowing for batches to be sent and settled throughout the day, but will be designed around hitting specific settlement windows.
- Same Day ACH will have a higher cost than "traditional" ACH. Under the new rule, the originating ACH bank will have an incremental cost to be paid to the receiving bank for all same-day ACH transactions processed. The exact pricing for same-day ACH will be up to each originating bank and will be offered at a price that is less than the cost of wire transfer, but higher than traditional ACH. There will be more to come on the pricing front, but in our minds there will be groupings of clients for which you will offer same-day ACH and groupings of clients for which you will offer "traditional" ACH.
- The process for NSF and returns notification will continue to be the responsibility of the receiving bank, and therefore the timing of the returns notification may or may not be the same day. Banks are likely going to handle return notifications differently, with some banks possibly sending return information on the same day while some will keep to an overnight returns notification process. This is an operational detail that will be bank-specific.
- It's important that your payroll software provider is aware and can handle changes associated with Same Day ACH. The settlement of the ACH file will continue to be driven by the effective date in the ACH file, so it will be important that your payroll software can accept a same-day effective date.
- Don't go selling Same Day ACH to your clients just yet. The rule was just approved, and now banks and ACH systems providers will be moving to update their operations and processes to reflect these new rules with completion by September 2016. Keep in touch with your bank or ACH provider about their status of implementation and rolling out Same Day ACH services.
There are certainly other considerations associated with Same Day ACH that will be developed over the coming months. It is important that payroll service providers stay abreast of these changes, and the Paystub will be providing updates on Same Day ACH as they develop. We welcome your comments and feedback. |