The Future of ACH is Here

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1 The Future of ACH is Here Using and Enhancing Same Day ACH Michael Herd SVP, ACH Network Administration NACHA The Electronic Payments Association Lawrence Pannell, Jr. Senior Consultant, Finance Office of Treasury Nationwide Joe Hussey Managing Director, North America Payables Product Management JPMorgan Treasury Services 1

2 Why Same Day ACH? From needs to desire for faster payment options 1 90 million ACH payments are made every day 2 Same-Day ACH creates an option for faster payments 3 Support the desires from corporates, financial institutions and other bank customers 2 2

3 Implementation of Initial Three Phases is Same Day ACH is Complete Functionality Phase 1 Sept. 23, 2016 Transaction Eligibility ($25,000 limit; IAT not eligible) New Same Day ACH Processing Windows New ACH Settlement Time(s) ACH Credit Funds Availability Same Day ACH Credits 10:30 am ET and 2:45 pm ET 1:00 pm ET and 5:00 pm ET End of RDFI s processing day Phase 2 Sept. 15, 2017 Same Day ACH Credits and Debits 10:30 am ET and 2:45 pm ET 1:00 pm ET and 5:00 pm ET End of RDFI s processing day Phase 3 March 16, 2018 Same Day ACH Credits and Debits 10:30 am ET and 2:45 pm ET 1:00 pm ET and 5:00 pm ET 5:00 pm RDFI local time 3

4 Same Day ACH Volume Credits and Debits 4

5 Evaluating Same Day ACH Evaluate new opportunities to originate Same Day payments Identify Opportunities Confirm deadlines and communicate with transactional partners Getting Ready to Initiate Best Practices Going Forward Understand potential impact on cash balances 12 5

6 Identify Opportunities How can your organization benefit from Same Day ACH? Review payment practices and identify opportunities where Same Day processing would be beneficial Work with trading partners to determine Same Day opportunities Look to utilize same day return window Check the Same Day offering of your financial institution 92% of originating financial institutions were prepared to originate on day one, but not all programs are the same Determine if internal systems need to be updated 13 6

7 Getting Ready to Initiate How can your organization ensure payments are processed smoothly? Confirm deadlines with your banking partners Communicate with receivers of Same Day debits Inform consumers of their payments options Ensure effective date is correct prior to using Same Day debits Effective date needs to be accurate, even if you are not originating same-day transactions 14 7

8 Best Practices Going Forward How can your organization mitigate potential risk? Monitor accounts more frequently Keep track of Same Day debits to your organization s accounts Know which trading partners are authorized to debit you Same Day Be aware of impacts to Controlled Disbursement accounts; zero balance accounts, sweeps, etc. Enhance cash reporting for forecasting Take advantage of reversals Do not process the reversal before the original transaction Take advantage of faster returns 15 8

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11 Nationwide s area of interest for implementing Same Day ACH Claims Payments Improve Member Experience Payroll Backup and Immediate Payment requirements Cash Positioning Cost Reduction Policy loans Improve Member Experience Wire replacement for asset purchases Cost Reduction Billing Decrease in customer float Accounts Payable Cost Reduction 9 11

12 Barriers to Implementation Transaction size limits return on investment Cost to change legacy systems Fraud concerns Customer Services impacts Increased transaction costs 10 12

13 Use Cases for Same Day ACH Credits Payroll Emergency payroll Hourly / part-time workers Termination pay Disbursement to independent contractors and gig workers Claim payments and other disbursements Emergency payments Refunds Business-to-business Invoice due date / late payments Just-in-time payments for release/shipment of goods Tax payments 5 13

14 5 Taking Advantage of Same Day ACH Debits Consumer bill payments Due date / late payments Payments to prevent loss of service Any bill payment in which credit is given immediately Any bill payment in which non-payment risk is elevated Business-to-business Just-in-time payments for release / shipment of goods Invoice due date / late payments Check conversion Merchant point-of-sale and lockboxes Collections Account transfers 14

15 Other Same Day ACH Use Cases Other Uses Returns Reversals Account validation Prenotifications and micro-transactions 16 15

16 Expanding Same Day ACH NACHA has formally proposed expanding Same Day ACH Provide a later Same Day ACH processing schedule Current processing deadlines are East Coast-oriented based on current Federal Reserve operating hours A later same-day schedule would benefit ACH end-users, particularly farther West, for use cases such as payroll, bill payment and B2B ACH end-users unanimously supported this proposal 17 16

17 Expanding Same Day ACH NACHA has formally proposed expanding Same Day ACH Increase Same Day ACH transaction dollar limit to $100,000 The current dollar limit is a barrier to some end-users from using, or fully using, SDA There is interest in a higher limit, but it is tempered somewhat by perspectives of credit vs. debit, and origination vs. receipt ACH end-users generally supported this proposal; some want an even higher light Provide faster funds availability Faster availability to account holders for both same day and next day credits 17 17

18 Expanding Same Day ACH NACHA has asked the industry to evaluate ACH processing on weekends and holidays What are the benefits and impacts? 17 18

19 Resources for Corporates Same Day ACH Resource Center Check and Correct Effective Entry Dates for Same Day ACH Debits in Phase 2 Same Day ACH Corporate Checklist: Phase 2 Debits Same Day ACH for Businesses Essentials Guide Accounts payable, accounts receivable, and payroll scenarios Same Day ACH for Businesses a Complimentary Webinar Recording.and much more 18 19

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