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How Same Day ACH Will Help (and Hinder) Treasurers

  • By Magnus Carlsson
  • Published: 6/22/2015

NACHA has approved Same Day ACH, and the measure will build upon existing ACH network capabilities.

Same Day ACH will:

  • Add two optional same-day settlement windows. An early window for transactions submitted by 10:30 a.m. Eastern will settle by 1 p.m. A later window for transactions submitted by 3 p.m. Eastern will settle by 5 p.m. Eastern.
  • Require all Receiving Depository Financial Institutions (RDFI’s) to receive Same Day ACH payments and make the funds available by 5 p.m. at the RDFI’s local time. Because of the requirement of the RDFI’s to participate, they will receive a 5.2 cent Same Day entry fee.
  • Exclude international transfers and high-value transactions over $25,000 per batch.

Same Day ACH: The good news for treasurers

Same Day ACH must be seen as a positive development for treasury and finance since this is a faster payment option in case a quick fund transfer is required. The additional cost of 5.2 cents could be problematic, especially if it is marked up by banks and passed over to corporate end-users. In cases where high volumes of transactions are processed these fees can add up to significant amounts. However, the key is that Same Day ACH is an optional feature that a corporate can choose to use should there be a particular need. The legacy systems will not change, so there is no need to make any changes to current payment procedures.

Any payment that needs to go out quickly can now be done with an ACH rather than a more expensive wire. And since the additional 5.2 cents per transaction is most likely considerably less than the cost for wires, organizations using a large number of wires should be able to save considerably on transaction costs by switching some to Same Day ACH.

For liquidity purposes there also could be a case for using the quicker ACH option. By using Same Day ACH it would be possible to improve working capital by holding on to cash one day longer before having to make payments. Other benefits include the possibility to make quick payments when needed, such as emergency payroll, state statutes, etc.

Same Day ACH: The not-so-good news for treasurers

In the current interest rate environment there is not much room for short-term investments as O/N rates are too low to offset the added cost for the transaction. For this reason, Same Day ACH would make more sense in a “normal” interest rate environment.

Other concerns about Same Day ACH include surprise debits late in the day that could make it difficult for treasurers to manage cash. There may also be some concern regarding the new settlement windows, especially from users on the West Coast, as it would be difficult to submit transactions before the cut-off times. For treasurers on the West Coast a cut-off time of 4 p.m. Pacific may work better, but it is unlikely this would be considered.

The ruling on Same Day ACH is also a very recent development and at this point it is not clear how banks will roll out the new service, or what the pricing will be. It remains to be seen whether banks will use Same Day ACH as a competitive tool by offering it without the extra charge, or if they will pass the fee over to the corporate users.

Finally, Same Day ACH could increase fraud, with criminals using fake emails of CEO’s and CFO’s to send fraudulent payment instructions to employees requesting them to make immediate fund transfers, or requesting fraudulent changes to current payment instructions. However, like standard ACH transactions Same Day ACH transactions can be returned if found to be unauthorized. Nevertheless, using Same Day ACH, treasurers should make sure to use faster account reconciliation to catch any fraudulent activity.

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