US banks have approved proposals to implement same-day electronic payments throughout the country’s 12,000 financial institutions, made possible with a range of upgrades to the existing ACH system, planned to be completed in 2018.
The plan will lead to substantial upgrades to the decades-old automated clearing house network, a payment network that is used for everything from bill payments, direct deposit of pay cheques and for numerous B2B transactions.
Today payments through the ACH network settle the day after they have been initiated. Once upgrades to the network are complete, remitters will have the option of sending money using a same-day settlement window for transactions that take place on a week day.
The banking industry group that oversees the operation of the ACH network, Nacha, announced that its voting membership had approved their proposal for upgrades to the network, however it didn’t release any information relating to the vote count itself.
"The financial services industry has come together through private-sector rulemaking to increase the speed of payments," said Nacha's president and chief executive officer Janet Estep.
Proposals were first put forward by Nacha back in 2012, which, despite securing support from the majority of Nacha’s members, fell short of the required supermajority needed to pass the proposals.
Nacha reworked their proposals early last year, revising existing provisions whilst adding additional ones designed to garner support of both big and small banks alike.
"Through dialogue, input and outreach, Nacha was able to balance differing perspectives and incorporate industry feedback from many types of organizations," said Estep.
"The result of this dialogue is a final rule that will benefit consumers and businesses that need to quickly pay bills and receive funds faster." she added.
The new rules set out plans for the creation of two new same-day settlement windows, allowing funds to move between different financial institutions 3 times per day, rather than once, which is how the ACH system currently operates.
All of the 12,000 or so credit unions and banks in the US would be required to accept same-day ACH payments on behalf of their customers. The system is scheduled to be implemented in 3 phases, completing by March 16th, 2018.
The new rules include a number of changes from the version that was originally released last year.
Most notable is the cost financial institutions than initiate same-day payments will need to pay, thought to be around 5.2 cents per transaction. This is down from the 8.2 cent that featured in the previous set of proposals and was revised after the Federal Reserve Board objected, saying this was too expensive.
Another significant change is the pushing back of the first of the two new settlement windows, with same-day payments submitted by 10:30 am Eastern time being settled by 1pm. The previous proposal called for the earlier cut-off time of 10am, with payment settled by noon.
Same-day payments will not be possible for transactions that are initiated over the weekend or a public holiday.
"Same day ACH serves as an immediate action the industry has undertaken to modernize the payments system, and creates a building block for a variety of products and services," Estep said.