After receiving enthusiastic responses to last year’s same-day ACH limit increase, the National Automated Clearing House Association (Nacha) has proposed layering in major limit increases over the next three years that would enable corporates to speed up a wide variety of debits and credits.
The proposal was issued December 7 and received 107 industry comments from financial institutions and industry associations by the January 22, 2021 deadline. Nacha may approve a proposal by the end of the second quarter.
The association, funded by the institutions it governs, increased the same-day limit last March to $100,000 from $25,000. Over the next month, the average payment size of same-day transactions increased by 40%, said Michael Herd, senior vice president of ACH Network Administration, adding that the dollar volume of same-day ACH payments increased by 86% in 2020.
That positive response from users prompted the current proposal, which would increase the limit to $1 million next year, to $10 million in 2023, and to a penny less than $100 million in 2024.
“With regard to the increase, can’t wait for it to happen,” said Frank D’Amadeo, director of treasury operations, Con Edison. “Once in place, we will move away from expensive wires on money movements between our internal accounts and other types of financial transactions that are traditionally made by wire, where a fed reference number is not required.”
Herd said that two-thirds of dollars moving across the ACH network are for B-to-B payments, and those have been the largest source of growth for the higher same-day dollar limit, although a variety of consumer-related payments also use the same-day service. Starting March 19, the ACH Network will process same-day payments three times per day, up from the current two; overnight and two-day payments are settled at 8:30 a.m. on the respective day.
The Clearing House’s RTP Network began facilitating payments in late 2017, starting with a $25,000 limit and increasing it to $100,000 last February. It, too, has received positive feedback from the increase, according to Gregory MacSweeney, spokesperson at The Clearing House, adding, “There is no current plan to increase the maximum RTP payment above $100,000, but raising the limit is a common topic in feedback from corporate treasurers and their banks.”
Same-day payments are popular when speed is important, such as paying independent contractors and other unsalaried workers in a timely fashion, or last-minute bill payments. Higher limits should be attractive in the B-to-B space for transfers such as merchant settlements of credit card payments that often are funded via ACH, or funding for a company’s payroll.
“We have anecdotal evidence that some companies aren’t using same-day ACH yet because it can’t accommodate their overall payroll volume,” Herd said, adding, “So every time there’s a limit increase, it will allow for more users.”
Herd said changing the dollar limits should be relatively easy to accommodate operationally in terms of sending and receiving payments, but there will be some challenges.
“Everyone needs to be ready to receive up to the new dollar limit, and operationally that should not be significant,” he said, noting, however, that more of a challenge will be to prepare “for the overall flow of dollars coming in or out of the organization, and how comfortable are folks with that.”
Nacha went live with its same-day service in September 2016, and last year saw more than 347 million payments, a 39% increase over the previous year.
For more information on this topic, download the AFP Payments Guide to Electronic and Real-Time Payments in Practice.