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The Resource for the Global Finance Profession

Third Time’s a Charm: Same-Day ACH to Settle 3 Times Daily

  • By Andrew Deichler
  • Published: 2014-04-09

ORLANDO, Fla. -- Same-day ACH would offer three daily settlements under a new, phased-in approach. Speaking at NACHA’s Payments 2014 yesterday, Jan Estep, the president and CEO of NACHA said the new approach would build on the morning settlement that already exists. “So you have next day, you build on that a mid-day and an end-of-day and that’s how you end up with three settlement times,” she said.

While attendees raised some concerns about late-day debits, corporate treasury and finance professionals and bankers generally were very supportive of NACHA’s plan.

“Most corporations have to have their borrowing and their investing decisions in by noon,” said Anita Patterson, CTP, director of treasury services for Cox Enterprises and vice chairman and treasurer of AFP’s Board of Directors. “But if you know something is coming in late in the day, you can make plans to either borrow some of your money back, or just leave it in the pot and not invest it that particular day. Or maybe you’re able to actually invest it late in the day—not quite as attractively as you can earlier, but it won’t sit around idle.”

William Schoch, president and CEO of Western Payment Alliance, said that his association of about 1,200 financial institutions, many of which have less than $500 million in assets, were concerned when NACHA introduced Expedited Process and Settlement (EPS), fearing that they would finish with a significant number of debits at the end of the day. “The fact that we’re starting with credits—there’s much less concern from financial institutions of ending the day with a balance,” he said.

Moreover, Schoch added that even with those concerns, financial institutions generally support same-day ACH settlement. “Most people think and share publicly that they think this is a natural evolution to the network,” he said. “They feel also that it’s going to be a platform where they can build new products.”

J. Christopher Ward, executive vice president, head of project management for treasury services at PNC Bank agreed. “There’s always going to be somebody who has an issue, but we’ve got to move the industry forward and I think this is a great step on that journey,” he said. .”

Leo Lipis, Ph.D, founder and managing director of payments consultancy Lipis & Lipis, noted that going from one settlement per day to multiple settlements makes the settlement process more complex, but “when you look at the countries that have gone through this previously, you will get an almost overwhelming response that it was worth it,” he said. “The value that it creates—both from a corporate’s perspective to be able to manage their cash more effectively on an intraday basis, as well as from the bank’s perspective, to be able to offer a higher-level service to their customers—that is all well worth the difficulty.” 

Copyright © 2015 Association for Financial Professionals, Inc.
All rights reserved.

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