Richard R. Oliver, former executive VP, Federal Reserve Bank of Atlanta, denotes the robust functionality that has been created with the Same Day ACH through the addition of two new settlement windows and settling at the end of the business day as a deadline for funds availability.
Several years ago I had the opportunity to fulfill a bucket list item by playing golf with my son at St. Andrews in Scotland. We teed off in 45-degree weather with a 20 mph wind and spitting rain. Perfect! As we made the turn to the back nine, the leaden sky suddenly yielded to the sun and the gloomy landscape became gloriously illuminated (and our game became a bit more inspired)! NACHA’s recent decision to make a second attempt at creating a same-day ACH environment is much like my St. Andrews experience, a glimmer of sunshine in an otherwise dreary payments landscape. The question, of course, is whether the time is now right for such a change.
In reviewing the proposed approach to same-day ACH in NACHA’s Request for Comment (RFC), I believe that they have done a good job of addressing the concerns raised by opponents of accelerated ACH processing the last time around, including the need for increased functionality and the economics of same-day services. First, let’s recognize that robust functionality has been created in this proposal, adding two new settlement windows instead of only one and setting the end of the business day as a deadline for funds availability. The proposal recognizes the economic incentive to change is a question for both originators and receivers of ACH entries. Moreover, the incentives vary depending on whether the item is a debit or credit. Originating financial institutions have the opportunity to create and charge for value-added same-day products (there is no telling what a company would pay for an emergency missed payroll), and they can, as interest rates rise, develop earnings from a day’s earlier availability on debit items. Receiving financial institutions always realize earnings from the deposit of credits, but they also bear the burden of a day’s earlier loss of funds from debited accounts...