Multiple improvements to the same-day Automated Clearing House electronic funds-transfer processing system are in the works, said an official at a nonprofit trade association for electronic payments.
A third processing window, expected to be available in 2021, would require funds to be made available to recipients by the end of the receiving institution’s processing day, said Shelly Sipple, director of certifications and continuing education for EPCOR Utilities Inc.
“For those of you who are on the West Coast, this gives you a better opportunity to take advantage of same day ACH,” Sipple said May 14 at the American Payroll Association Congress in Long Beach, Calif., referring to the system that enables employers to make payroll deposits into employee accounts at almost any U.S. financial institution.
The Federal Reserve soon is to publish in the Federal Register a proposed regulation that would codify the additional window, which was approved by NACHA, said William Sullivan, senior director and group manager of the association’s government and industry-relations group.
NACHA, previously known as the National Automated Clearinghouse Association, establishes the rules governing the exchange of commercial electronic payments, including direct deposit payments, through a national network of automated clearing houses.
A request for comments on the proposed regulation is to seek information about the use of the same-day ACH windows and why faster processing is important to employers, Sullivan said. The deadline for comments is expected to be in July. The proposed regulation is to deal with Fedwire and the National Settlement Services, he said.
The Federal Reserve Banks operate Fedwire, a real-time gross settlement system to settle funds electronically between banks, and the National Settlement Service, a multilateral settlement service used by clearinghouses, financial exchanges, and other clearing and settlement groups.
Other updates to the same-day ACH system are scheduled, Sipple said. Starting Sept. 20, 2019, transactions initiated in the first processing window must be made available to recipients by 1:30 p.m. local time, she said. Most institutions have implemented this change in processes, although the first-window requirement is for funds to be made available by 5 p.m., she said.
The maximum amount that may be paid using same-day processing is to increase to $100,000 from $25,000 on March 20, 2020, Sipple said. Employers are not to be able to divide larger transactions into multiple payments of $100,000; such transactions will need to be completed using traditional ACH processes or a wire transfer, she said.
There were 53.5 million same-day ACH transactions in first quarter of 2019, Sullivan said. “We saw a huge jump in same day ACH once the debit phase was entered,” he said.
Same-day ACH debit transactions may allow employers to reverse erroneous payments in the same day they occur because it increases the chance that employers may recover funds before they are spent, Sipple said.
More generally, same-day processing frequently is used for emergency payments and off-cycle payments, such as bonuses or termination pay, Sullivan said.