Same Day ACH Phase 2: Debits

13 Pages·2017·0.9 MB·English

SEPTEMBER 2017
Coming Soon:
Same Day ACH Phase 2: Debits
“The message we’ve been sending to our members is [this]:
Do not assume because you’ve prepared and tested and found
In Q2 2017, the ACH Network NEACH launches ‘Check@5’
no issues with Phase 1 that you are done and ready for Phase 2.”
processed 5.3 billion direct education campaign ahead of
deposits and direct payments Same Day ACH debit rollout
valued at $11.6 trillion
Laura Steele, president and CEO of ePayResources
FasterPayments

Tracker™
Table of Contents
03
What’s Inside
The biggest developments across the Faster Payments landscape, including an
uptick in ACH Network activity during Q2 2017, new collaborations to bring real-time
payments to European FIs and new services to make international money transfers
faster and easier.
06
Feature Story
Coming Soon: Same Day ACH Phase 2: Debits
As Same Day ACH Phase 2 approaches, Laura Steele, president and CEO of Regional
Payments Association ePayResources, explains what made last year’s rollout of
Phase 1 successful and what the financial industry needs to understand about the
latest rollout. Plus, Ross McKay, senior vice president of corporate products and
services for TD Bank, on why the industry sees Same Day ACH Phase 2 as an “incre-
mental improvement” to the payment system.
09
News and Trends
Notable recent headlines from around the Faster Payments space.
© 2017 PYMNTS.com all rights reserved 2
What’s Inside
The U.S. faster payments system has under-
gone some major changes over the past Executive Insight
year, and even more changes are on the
horizon.
Roughly one year ago, the financial services com-
munity was waiting for the first phase of Same Day
Which business sectors stand to
ACH implementation to go live and enable same-day
benefit most from the availability
settlement of ACH credits. Fast forward a year and
the financial community is once again waiting — this of Same Day ACH debit?
time for the same-day settlement of debit transac-
tions, the next stage of Same Day ACH implementa-
“Same Day ACH debits can provide value to many ACH
tion.
Network users through a variety of use cases. But, spe-
cifically, Same Day ACH debits could bring significant
If recent ACH Network activity is any kind of bellweth-
benefit to companies that bill consumers, such as tele-
er, network volumes could see an uptick once Same com, insurance and utility companies. Same Day ACH
Day ACH debit goes live. During Q2 2017, roughly debits will provide an option that billers can offer their
5.3 billion direct deposit and direct payments were customers to pay bills on the due date, or to be credit-
made on the ACH Network, valued at approximately ed more quickly for late payments.
$11.6 trillion. That vast figure represents a 6 percent
increase from the same fiscal quarter last year.
For consumers, this could eliminate disruptions in
service, late fees or other inconveniences. While reg-
Once Same Day ACH debit capabilities are launched ularly scheduled payments will continue to work well
and made available, authorized same-day debit trans- for many consumer payments, consumers and billers
actions will post to accounts faster. In other words, alike welcome the option to have one-time and un-
scheduled payments be completed more quickly.”
money will spend less time in a bank account once a
same- day transaction is authorized. Bank customers
who are not aware of the rollout could be in for a rude Jane Larimer,
awakening if their account balances are not kept in
chief operating officer and
check. To that end, the New England Automated
general counsel for NACHA
Clearing House (NEACH) Regional Payments Asso-
ciation recently launched an educational campaign
called “Check@5.” The campaign is meant to encour-
age banks and other FIs to educate their consumers
about what Same Day ACH debits will mean to them.
less excited and anxious about the next installment
of the Same Day ACH trilogy. For the September
Coming Soon: Same Day ACH Phase 2
Tracker’s feature story (p. 6), Laura Steele, president
Last year, when the financial industry prepared for the and CEO of Regional Payments Association ePayRe-
rollout of Same Day ACH Phase 1, it treated the event sources, spoke with PYMNTS about why FIs should
with the same seriousness as the countdown to the not get complacent during the rollout of Same Day
Y2K bug in 1999. A year later, the industry appears ACH Phase 2, even though Same Day ACH Phase 1
© 2017 PYMNTS.com all rights reserved 3
What’s Inside
went smoothly. Plus, Ross McKay, senior vice presi- European market and help Europe’s financial institu-
dent of corporate products for TD Bank, weighed in tions prepare to make use of EBA CLEARING’s RT1
on the reasons the financial industry sees the new platform before it goes live in November. UniCredit,
service as an “incremental improvement” to the pay- for one, announced it will work with EBA CLEARING
ment network. to make real-time payments available to its cus-
tomers in Italy and Germany once the RT1 platform
The rollout of Same Day ACH debits is just one of launches. Meanwhile, other companies are teaming
several notable trends in faster payments over the up to give FIs a safe space to test what real-time pay-
past few weeks. Other companies launched services ments can offer. Among those stepping up to explore
that are helping both businesses and individuals de- real-time payments’ capabilities are Finastra and SIA.
liver funds quickly across borders, further moving the The companies are collaborating to use Finastra’s
ball on bringing faster payments to networks. payment solutions to connect to RT1 using SIAnet’s
infrastructure, allowing European FIs to test real-time
payment capabilities in a cloud-based testing envi-
Here’s what’s happening around the world of
ronment.
Faster Payments:
As payments get faster, it appears the world is get-
Other companies are getting FIs in the U.S. used to
ting flatter. New tech developments are helping pay-
the idea of faster payments. One of those companies
ments cross international borders at an increasing
is SWIFT, which recently announced it will provide a
speed — and with greater efficiency.
gateway to The Clearing House’s (TCH) real-time pay-
ments platform. With SWIFT’s gateway in place, U.S.
For example, a recent development from WireCash. customers and businesses will be able to send and
com launched to give customers a new, more con- receive payments directly from their bank accounts
venient option to send money overseas. The inter- in real time.
national money transfer service’s newest feature
enables customers to use their bank accounts in-
Another company, IT solutions provider Icon Solu-
stead of a debit or a credit card to make international
tions, recently announced it had begun testing con-
money transfers. WireCash believes this service will
nectivity between its own Instant Payments Frame-
be more appealing than using a payment card. It re-
work and TCH’s faster payments network, enabling
lieves customers’ need to update the expiration date
banks to process payments quickly and on a 24/7
or security code information necessary when using
basis.
payment cards to complete transactions.
Check out the Tracker’s News and Trends section for
In other international payment news, several com-
more headlines on the shifting nature of payments.
panies took steps to bring real-time payments to the
© 2017 PYMNTS.com all rights reserved 4
What’s Inside
FIve Fast FActs
90% Percentage of surveyed
suppliers who say getting
paid faster is the top priority
when issuing invoices.
66%
Percentage of banks in markets with live instant
payment schemes that view IPs as a revenue driver.
$16.6
Value of same-day payments transferred during Q2 2017,
the third full quarter of implementation for Same Day
Billion
ACH credit.
48%
Percentage of consumers who think
consumer-to-business payments will benefit most
from the SEPA Instant Credit Transfer scheme.
57% Percentage of surveyed cor-
porates actively considering
deployment of blockchain
technology.
© 2017 PYMNTS.com all rights reserved 5
Feature Story
Same Day ACH Phase 2:
The Financial
Summer Blockbuster?
Ac ommon problem with Hollywood movie changes would mean for their organizations, and for
sequels is they usually do not quite live up all of their customers. Those same organizations are
to the impact of their predecessors. Apol- now working to make sure the next stage unfolds
ogies to any Iron Man 3 devotees reading smoothly as well.
this, but follow-ups just typically don’t have the Jaws
of, well, the original. And, come on — four Chipmunks The Phase 2 rollout will occur September 15, 2017,
movies? and, once it goes live, financial institutions will need
to accept same-day debits. But this time, much like a
Hollywood metaphor (almost) aside, there’s another movie sequel, some payment associations are see-
industry near and dear to the Faster Payments Track- ing less buzz around the changes the Phase 2 rollout
er’s heart, and it’s also producing sequels these days. will bring to the market.
The U.S. payment system has embarked on the finan-
cial equivalent of a film trilogy with its Same Day ACH In a recent interview with PYMNTS, Laura Steele,
initiative, an initiative which will bring big changes to president and CEO of Regional Payments Associa-
the ACH Network. tion ePayResources, said while last year’s rollout of
Phase 1 was successful, the financial community
The first of three Phases launched last year, requir- should not assume things will go just as smoothly
ing financial institutions to receive ACH credits in this time around. PYMNTS recently spoke with both
two new same-day settlement windows (for a total Steele and Ross McKay, senior vice president of cor-
of three daily). By some accounts, the anticipated porate products and services for TD Bank, about how
change to the system in 2016 was comparable to the the availability of Same Day ACH debit services will
hysteria that preceded the then-unknown effects of impact organizations’ bottom lines, and why finan-
the Y2K bug. But, despite numerous questions from cial institutions need to pay attention to the coming
the industry, the Phase 1 rollout went down without changes — even if they think they’ve already seen this
a hitch. show.
One of reasons the rollout was so successful involved Y2K all over again
education efforts made by NACHA and the Regional
In anticipation of the rollout of Same Day ACH Phase
Payments Associations which ensured member fi-
1, Steele said the financial services industry treated
nancial institutions understood what Same Day ACH
the change as a “Y2K-type” event.
© 2017 PYMNTS.com all rights reserved 6
Feature Story
“It was the biggest thing to happen to the ACH Net- Phase 2 is live, receiving parties could find money
work in 40 years,” Steele said. has moved out of their accounts faster than they
are accustomed. Also, if there is an issue with the
Steele said the industry went to great lengths to pre- entry date of a transaction and debits post early to
pare for the potential impact by raising awareness accounts, Steele said, customers will be very upset
among financial institutions and educating the indus- with the institutions. It’s important for banks to un-
try about how the implementation would affect their derstand what the changes mean and convey those
operations. changes to their business and consumer customers,
she added.
In the end, the training efforts paid off, Steele said. By
treating the rollout of Same Day ACH Phase 1 as an “People aren’t going to complain if you put money
education-worthy event, the Phase 1 implementation into their account too early, but you can rest assured
went smoothly. In the end, like the Y2K frenzy that people will complain — and probably complain pretty
preceded it years earlier, preparation efforts paid off loudly — if you take money out of their [accounts] be-
and no major problems were reported. fore you’re authorized to do so,” Steele advised.
Fighting financial institu- For banks, Same Day ACH
tion complacency for Same debits mean incremental
Day ACH debits change
It was the biggest thing to happen
While the first implementa- McKay said TD Bank is ready
to the ACH Network in 40 years
tion was smooth, Steele is for the Phase 2 rollout and
urging ePayResources’ mem- has been educating its cus-
ber institutions to be vigilant tomers about the impacts of
on the eve of the Phase 2 roll- the change.
out and to fully understand
what changes it could bring. Compared to last year’s To ensure that originating customers are intending
Phase 1 trepidation and caution, Steele said mem- to process same-day transactions, McKay said the
bers appear to be demonstrating a more laid back bank will not automatically enroll its business cus-
attitude toward the Phase 2 rollout. tomers in Same Day ACH debits. Instead, businesses
interested in offering it can ask to subscribe to the
“[The Same Day ACH Phase 1 rollout] was kind of a service through their bank representatives.
non-event because not a lot of things went wrong,”
Steele said. While Same Day ACH debits may allow more busi-
nesses and consumers to deliver money faster,
Steele also reminds member institutions that just McKay sees most businesses and customers using
because things went smoothly the first time doesn’t scheduling tools to plan their finances according-
mean they can get complacent. ly. This means they are less likely to get caught off
guard by funds that move too early. “Classic ACH” re-
“The message we’ve been sending to our members mains available to everyone in the industry who ben-
is [this]: Do not assume because you’ve prepared and efits from the convenience of scheduling their pay-
tested and found no issues with Phase 1 that you are ments ahead of time vs. waiting until the last minute
done and ready for Phase 2,” she warned. to authorize a payment.
In fact, the stakes are slightly different for Phase 2 “For the most part, businesses and consumers
than they were for Phase 1. Unlike Phase 1, which schedule payments,” said McKay, comparing Same
authorized faster credits, Phase 2 will mean debits Day ACH debits to an enhanced version of the bill
can be made faster. If all goes as expected, once pay feature.
© 2017 PYMNTS.com all rights reserved 7
Feature Story
Once Phase 2 is rolled out, McKay said, it will rep-
resent a measured change to the ACH Network. “I UNDER THE HOOD
don’t think it will be revolutionary, but I think it will be
another incremental improvement to the [payments]
ecosystem,” he said.
Risky debit business
What could go wrong for FIs
Steele said financial institutions should be taking
that are not prepared for the changes
steps to ensure that debit payments are made only
Same Day ACH Phase 2 will bring?
on the date when they are authorized to be debited.
All financial institutions and businesses are encour-
aged to ensure that the effective entry date rep- “If, for whatever reason, a receiving institution sees
resents the date the debit should be posted. a material number of debits that are coming through
as unintended, it could create a material number of
exceptions for them to be managing. It could [also]
So far, she said, ePayResources’ members are saying
create a material number of impacted receiver ac-
they are prepared. Steele noted that receiving bank
counts, and that could have the potential for repu-
members are taking steps to mitigate the potential
tational risk.
impact of any unintended Same Day ACH debits.
Some member institutions have stated they will post If you think about it, the originating organization is
debits but will waive any non-sufficient funds (NSF) the ODFI’s customer. If the originating organization
fees associated with debits posted earlier than antic- submits a large file, and with several unintended
ipated, at least in the early stages after the Same Day same-day debits in the file, those can hit down-
ACH debit rollout, she said. stream. The receiving institution … has no control
over that because they didn’t originate the file and
they’re not the ODFI.
Based on what she has heard from member organi-
zations so far, Steele believes the number of unin-
That’s why it’s really important, on the originating
tended debits will be minimal once Same Day ACH end of things, that the files are accurate and the ef-
debits is available. Still, she’s preparing to hear from fective entry date is the effective same-day date.”
members who will inevitably wind up dealing with
these unplanned transactions.
Laura Steele,
president and CEO of ePayResources
“You’ll hear some people say, ‘It’s not a matter of if,
but when it happens,’” Steele said. “My hope is that
those are fewer than [we think].”
In a short time, the financial world will get a taste of
in March 2018, and will require RDFIs to make funds
Same Day ACH debits. How the new service is uti-
available for Same Day ACH credits by 5 p.m. How
lized and if the number of unintended debits can be
the Same Day ACH Phase 2 rollout performs could
kept to a minimum could determine whether this se-
determine whether the financial services community
quel lives up to the success of its predecessor.
reaches for the popcorn in anticipation of the final
entry in the Same Day ACH trilogy.
Coming Soon: “S.D. ACH III – The Final Chapter”
And, of course, there’s more to come. The third and “The use cases are going to keep growing,” Giorgio
final phase of Same Day ACH is scheduled to roll out said.
© 2017 PYMNTS.com all rights reserved 8
News & Trends
What’s Trending
helping financial institutions educate customers
about what Same Day ACH debits will mean, particu-
larly about how money might post to their accounts
Network News
at a rate faster than they are currently used to seeing.
ACH Network sees 5.3 billion direct deposits and
Same Day ACH debits are scheduled to go live on
direct payments delivered in Q2 2017
September 15 and “pending” transaction times are
The past fiscal quarter saw an uptick for the ACH going to get shorter once that happens (however,
Network, according to NACHA. During Q2 2017, the payments will still be posted to the account on the
ACH Network transferred 5.3 billion direct deposits date authorized by the consumer). The Check@5
and direct payments valued at $11.6 trillion, a 6 per- campaign offers a toolkit on which banks and credit
cent increase from the same quarter last year. Na- unions can rely to prepare customers for Same Day
tive electronic payments increased by 7.4 percent in ACH changes. Items in the toolkit include a co-brand-
the current quarter, while check-initiated payments ed fact sheet, an email for both consumer and busi-
dropped by 10.5 percent. ness customers, social media posts, web and mobile
site ads and a NACHA guide for receiving banks and
Q2 2017 was also a busy period for WEB payments, credit unions.
with 1.3 billion WEB transactions reported, an in-
crease of 13 percent over the amount reported in Q2 In a statement, NEACH president and CEO Sean Car-
2016. NACHA reported WEB credits, P2P payments, ter noted the purpose of the campaign is to help con-
increased by 19.7 percent from same period last year sumers develop strong financial management habits
to 23.7 million transactions while WEB debits grew ahead of the faster-acting payment service. “Finan-
by 13.2 percent. cial institutions want their customers to be aware
that these advancements in payments will move
Overall, WEB transactions are the second-most pop- money into and out of their accounts more quickly,
ular type of transaction by volume, representing 24 and Check@5 is designed to help communicate that
percent of the ACH Network volume. The most pop- message,” Carter said.
ular transaction type is prearranged payment and de-
posit (PPD) transactions, representing 50 percent of
SWIFT is bringing instant payments to the US
Network volume, according to NACHA.
Another collaboration with U.S. financial institutions
is underway thanks to financial messaging service
NEACH urges members to ‘Check@5’
SWIFT. SWIFT recently announced it will provide
As the rollout of Same Day ACH debits approach- a gateway to The Clearing House’s (TCH) real-time
es, the New England Automated Clearing House payments (RTP) platform. With the gateway in place,
(NEACH) Association has launched a new education- SWIFT will be able to offer an interface to manage
al campaign to make sure consumers are on top of the requirements of sending and receiving domestic
their balances by the close of each business day. The instant payment transactions on behalf of custom-
new campaign, called “Check@5,” is geared toward ers.
© 2017 PYMNTS.com all rights reserved 9
News & Trends
TCH’s new clearing and settlement system will allow In the same statement, Icon’s head of payments Tom
U.S.-based consumers and businesses to send and Hay explained the significance of the integration be-
receive payments in real-time, directly from bank ac- tween the TCH and the IPF systems. “Icon’s devel-
counts. The company will also enable customers to opment of off-the-shelf integration with TCH network
transmit data and non-payment messages that finan- infrastructure will provide U.S. banks with a ‘plug and
cial institutions can use to build digital commerce play’ option for connecting to TCH’s real-time pay-
solutions. SWIFT will offer banks access to the TCH ments platform,” Hay said. “IPF already supports the
platform through the Alliance Messaging Hub (AMH) processing of real-time payments in Europe and will
for both high- and low-value real-time payments. now meet the needs of U.S. customers who find the
AMH, an orchestration layer that includes a gateway cost and complexity of payment hubs a potential bar-
to the TCH RTP network as well as other gateways rier to entry for delivering real-time payments.”
and APIs, allows financial institutions to connect to
other non-SWIFT networks. Icon began functional testing between the IPF and
EBA CLEARING’s pan-European infrastructure solu-
Icon Solutions takes next step in linking US tion RT1 in early August.
banks to faster payments
Federal Reserve praises work of its Faster Pay-
Another company testing real-time payments using
TCH’s network is IT solutions provider Icon Solu- ments Task Force
tions. The company recently announced it began In July, the Federal Reserve’s Faster Payments Task
testing connectivity between its Instant Payments Force wrapped up its efforts to outline recommen-
Framework (IPF) and TCH’s new faster payments dations to strengthen the U.S. faster payments sys-
infrastructure. The launch of a TCH gateway signals tem. The 300-member group recently released its
Icon’s latest step in pushing for faster payments for final report, “The U.S. Path to Faster Payments: A Call
banks. IPF enables banks and other financial insti- to Action,” which lists 16 proposed solutions for ad-
tutions to undertake real-time payments processing dressing faster payments. Among those solutions,
— instantly, and 24/7 — the company explained in a the report calls for payment industry stakeholders to
statement.
© 2017 PYMNTS.com all rights reserved 10