In the latest episode of the AFP Conversations podcast, Michael Herd, senior managing director, ACH network rules at NACHA, discussed the progress of the Same Day ACH program. Herd commented on how the initiative is going, the future of it and, of course, why treasury and finance professionals should take advantage of it. Listen to the entire podcast here.
AFP Conversations: So you have some new numbers, some fresh data on usage of Same Day ACH.
Michael Herd: Certainly. First, we have actual usage statistics for Same Day ACH through the year end of 2016, and we saw about 13 million same-day transactions, moving about $17 billion.
AFP Conversations: 17 billion a day?
Herd: No. That’s the time period from when same-day ACH went live in September, through December.
Just yesterday, as a matter of fact, we were able to release survey results of some financial institutions. FIs are seeing same-day ACH volume of at least what they were expecting or in many cases higher than what they were expecting, so that’s good from a volume and usage perspective. We also wanted to know if they were seeing any uptick in the incidence of fraud due to same-day ACH, and 100 percent of our FIs that answered that question said no, that they were not. I think we’ve been trying to educate the industry on sound risk management practices, but Same Day ACH in and of itself doesn’t introduce any new access channels or banking information which could get compromised.
AFP Conversations: Any other new findings you’d like to share?
Herd: I think we all are not surprised about payroll payments being one of the predominate use cases, but another interesting finding from our financial institutions is that they’re seeing a lot of enthusiasm for Same Day ACH from what they call the middle market—so not small businesses, not the largest corporates. But 84 percent of these FIs said that they were seeing use for Same Day ACH from the mid-market companies, kind of a surprising finding there, but wonderful news. And at NACHA we’ll be working throughout this year to further use among corporates of all sizes. We’d like to see the big guys, but we’d also like to see small businesses get into the use of Same Day ACH.
AFP Conversations: Obviously, this has been a huge undertaking for NACHA. It sounds like things are off to a good start; there have been some surprising and positive numbers. What did you expect when this was getting ready to go live?
Herd: I think that we expected a slow and steady launch and roll out. I think it's gone exceptionally well from an operations and technical perspective. Diving into the numbers, the primary use so far has been around emergency payroll payments. This is really a gap that has existed, not just with ACH, but for companies making payroll payments for a long time where it's simply when you miss a deadline, what is your recourse? How do you recover from that? It’s really been a pain point for corporates and employees, and we expected same-day ACH to set in and fill that gap, and it looks like it has, in fact, done so.
AFP Conversations: What have you been hearing from corporates? Obviously, some have taken it up. They must be happy with it to a certain extent because the numbers are good. But in general as you were leading up to this, were corporates saying, ‘This is a great idea; can't wait to have it’, or, has it been more like an education process where corporates said, ‘Do we really even need this’?
Herd: It’s been both. I think the reaction we’ve had from a lot of corporates is that they’re very pleased with the idea that we have moved and enhanced the ACH capabilities so that this is now available. I think there’s been a fair amount of education that’s gone into the corporate end users about what the new features are. Obviously, we’re rolling out in phases, so it's not fully phased-in as of yet. We have ACH credits now eligible for same-day processing, and we know that a lot of corporates are very interested in the same-day ACH debit capability that will come online later on this year in September.
AFP Conversations: What have you been hearing from them so far in terms of pain points or areas that you need to improve upon?
Herd: I think one is that a lot of folks were evaluating same-day ACH from a perspective of being what we call an originator or a sender of a payment. But, they also need to recognize that they could receive a Same Day ACH payment, they might get one in. And so they need to fully understand and evaluate what that means. When you get in a Same Day ACH payment, what are you going to do with it? We’ve heard about remittance information, so for a lot of corporates speed of payment is important, but information that accompanies the payment is just as important. Same-day ACH has the same remittance information capabilities as a standard ACH payment does.
One of the things that corporates have been asking about or concerned with are financial institutions providing the same level of transaction and remittance detail as they do with traditional next day ACH payments. Actually, a bit of new information out of our financial institution survey that we just finished and released is that a majority of financial institutions are providing that type of transaction information to their corporate clients after the close of each Same Day ACH processing window. So, that kind of information does appear to be readily available from financial institutions with the speed that corporates would want to have it.