Forty Is The New Faster (Payments)

Forty is the new faster — payments, that is.

More than 40 years after its debut, the Automated Clearing House Network becomes the first payments system in the country to offer ubiquitous faster payments to every consumer and business in the U.S. via all banks and credit unions.

Today (Sept. 23) marks the launch of Same Day ACH, with three settlement windows enabling consumers and businesses to receive credit, same day, for payments made to them.

Every bank in the U.S. is now capable of receiving and enabling this same-day capability.

But in many ways, today’s milestone is all about what’s next for ACH. Same Day ACH and credit push was the first phase of a multi-phased effort to enable faster, more flexible and smarter payments to move between people and businesses.

“When you think about the ACH Network today, it’s important to recognize that almost 60 percent of the existing ACH Network is debit-pull transactions, and it’s certainly something that most people say ‘should move faster,’” said Jan Estep, NACHA president and CEO.

Same Day ACH Phase Two is all about debits — to be enabled by all banks in the U.S. by Sept. 15, 2017.

The flexibility of the ACH Network allows debit payments to be scheduled in advance. With that being the case, one might ask, if debits can indeed be scheduled and anticipated by consumers, corporates and financial institutions, why do they need faster movement?

One thing to keep in mind for scheduled debit payments is that “same-day debits will never be debited from an account before it is scheduled,” Estep said. So, if you have a recurring debit and you always pay a utility bill on the 15th of the month, you have a payment that is made on the 15th. If you have a one-time payment and you ask for that to be debited from your account on the next day or two days from now, that will not move faster.

But for those that desire a payment be made on the same day, same-day debits can provide great value.

To explain, Estep offered up a hypothetical.

“If you are on the phone with the utility company and they are about to turn off service and they say that they need to receive payment today or the service is going to be cut off, with Same Day ACH, the utility company can initiate a debit from your account now, and that payment can be applied to your utility account the same day,” said Estep. For the consumer, that’s valuable because it gives them choice and the power to avoid a disruption in service, and for the business, it allows it to know sooner if a payment is good, added Estep.

Same-day debits, said Estep, also offer a number of risk benefits since returns can be received faster. “Since the bulk of debits are around bill payment, knowing that [payments] have been delivered and knowing faster that they have been delivered successfully without a return provides great value to businesses.”

One additional benefit from the Same Day ACH debit initiative comes, said Estep, with improved user interfaces, and this can extend from treasury management portals for businesses to simpler portals to be used by smaller businesses or even individual consumers. It becomes easier, said Estep, and more intuitive for users to be asked to make a payment and then to be asked when they want to schedule those payments, including for that same day — a user interface improvement that she said “takes the ‘paymenteze’ out of the equation.”

Even though NACHA will not be allowing the origination of same-day debit transactions across ACH before the Sept. 15 launch next year, Estep stated: “The expectation is that all financial institutions will be ready as of Sept. 15 next year, and of course, that is less than a year away.”

The preparations for adding debits are already underway, she said, noting: “Certainly, some financial institutions, when they were looking at adding same-day credits [across ACH], were also looking at debits, and they’ve also said, ‘Let’s be ready for debits.’ The patient was already open for surgery.”

Those firms, when it comes time, will be ready for bill payment, collection of payments and even check conversion — the latter of which can be an added benefit at the point of sale.