October 7, 2016
By John Stewart
For all the widespread anticipation of same-day settlement on the automated clearing house network, the first two weeks of faster processing has been a relatively quiet affair, bank executives and other experts tell Digital Transactions News. But that doesn’t mean a number of pressing questions aren’t hovering over the new clearing regime.
“At the risk of saying I told you so, I believe we’ll look back and wonder what we were wringing our hands about,” says Bob Steen, chief executive of Bridge Community Bank in Mechanicsville, Iowa, referring to the years of debate leading up to the decision to enable same-day ACH.
On Sept. 23, receiving financial institutions were required to begin settling ACH credits—used for such functions as payroll deposits and person-to-person payments—on the same day they are received. On Sept. 15, 2017, same-day settlement will be enabled for ACH debits, used often for bill payments. In effect, the network is moving up settlement by a day by adding two daily settlement windows to the existing one.
Fourteen days after same-day credits began processing on the nation’s ACH network, Steen says his bank and most others are handling the faster clearing with few if any hiccups. While he concedes it’s still early, he says, “There’s no overwhelming amount of [same-day volume]. My day didn’t change.” Indeed, he says to his knowledge the bank hasn’t seen any payroll files so far, though payroll is seen as a main application for same-day credits. “The industry is taking this in stride,” he adds. “For many, it was a non-event.”
Likewise at Mercantile Bank of Michigan, which serves the Grand Rapids, Holland, and Lansing markets. “It’s been pretty quiet,” says John Schulte, senior vice president and chief information officer. The bank has done some same-day origination, he says, including last-minute payroll files.
For the ACH network as a whole, little information is yet available on same-day volume, though ACH governing body NACHA says it plans to release data in coming weeks. “I’m afraid the silence has been resounding,” says Nancy Atkinson, a senior analyst at Boston-based Aite Group who follows the ACH. “It has been pretty much business as usual.”
Atkinson expects same-day volume to build steadily as deadlines near for such items as quarterly tax payments. Payroll activity, too, will fuel growth in the near term. “Initially, [same-day credits] will be a stop-gap measure for late payroll or other last-minute payments,” she says. “Person-to-person or other consumer ACH same-day payments will take a while to register given the total daily volume of payments processed.”
But while same-day operations have been largely routine so far, bankers have plenty of questions. Schulte, for example, says prominent matters still unsettled at his bank include pricing and risk management. Under the new rules, institutions that originate same-day ACH items must pay receiving banks 5.2 cents per transaction, a fee they are expected to mark up and pass on to merchants and other clients.
Schulte says Mercantile is working to hash that out. “The biggest question is what to charge,” he says. “We haven’t decided if we’ll go with a flat fee or per-item charge.” For same-day payroll, Mercantile is charging $50 per file, but the bank has not applied that pricing across the board, Schulte says, and it could change. Pricing won’t remain uncertain for long. Schulte expects a decision by early next year.
He adds the bank is also noodling questions surrounding how best to manage risk. Faster settlement means there’s less time to inspect files for fraud. “Same day adds a risk component,” he says. “Do we roll it out to all clients or just some?”
Still, Steen agrees with Atkinson that same-day volume will build soon as businesses and consumers wake up to the cost and operational advantages. “You could do the same thing with a wire, but it’s more expensive and cumbersome,” he says.
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