In a move that could have wide-ranging implications for a variety of payments, the Federal Reserve on Monday announced it will support a third settlement window each day for same-day automated clearing house transactions. The later settlement time, which ACH rule-making authority Nacha and a number of banks have long pushed for, will allow financial institutions in the Western half of the country to submit more payments for same-day handling each day.
Under the rule change, which is expected to take effect March 19, 2021, the Fed will keep its National Settlement service open until 6:30 p.m. Eastern Time, one hour later than its current closing time. The Fedwire Funds Service will stay open a half hour longer until 7 p.m. As a result, the latest daily deadline for same-day ACH will occur at 4:45 p.m. Eastern Time, two hours later than the current cut-off.
Calling the extended time each day “necessary for the expansion of same-day ACH,” Nacha said the move is one of two changes most often requested by users of the ACH network. The other one is a higher limit for same-day transactions. That change is set to take effect in March and will move the per-transaction cap up to $100,000 from $25,000.
Herndon, Va.-based Nacha originally pushed for a September 2020 effective date for the third daily processing window, but delays at the Fed pushed the date into 2021.
The later window for same-day settlement will affect a wide range of transactions. The ACH network, which reaches nearly every financial institution in the country, commonly handles payroll and business payments as well as business-to-business and peer-to-peer transfers. Also, so-called instant-payout transfers for freelancers, ride-share drivers, and other so-called gig-economy participants often depend on the ACH same-day capability.
The third settlement window “certainly is an improvement if you’re looking for the capability to do instant pay, which is almost table stakes,” Patricia Hewitt, principal at PG Research & Advisory Services, a Savannah, Ga.-based consultancy, tells Digital Transactions News. The later availability will also permit more same-day settlement of last-minute bill payments, she adds.
Same-day ACH credits have been available since 2016, with same-day debits added a year later. Calling adoption of the same-day option “strong,” Nacha estimated Monday that the ACH will process 250 million same-day payments this year, about half of all same-day traffic since the service’s start dates.