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Why Treasurers of Large Corporates Don’t Use Faster Payments

  • By Andrew Deichler
  • Published: 5/11/2017

NASHVILLE, Tenn. -- Although NACHA’s launch of Same Day ACH has been quite successful, it has not been a smash hit with treasurers of large corporations. During a NACHA update at the latest meeting of AFP’s Treasury Advisory Group (TAG), the reasons became a bit clearer.

When Bill Sullivan, senior director and group manager, government and industry relations for NACHA asked the group of TAG members—most of which are with large corporates—how many of them currently use Same Day ACH credits, and only one raised her hand. He then asked if any of them plan to use same-day debits, which launch in September. No one raised their hands.

Why treasurers are hesitant

A key reason for the lack of corporate uptake has been a lack of activity on the part of the banks—something treasury professionals have previously voiced their frustrations over. “Our banks have not told us those services are available yet,” said Sassan Parandeh, CTP, global treasurer for ChildFund International. “I don’t think they’re getting the word out.”

Meanwhile, the banks have been saying the opposite—with some even going so far as to claim that the corporates don’t know what they’re talking about. “So the truth probably lies somewhere in between,” Sullivan said.

Additionally, the settlement times have caused issues for some treasurers, as they don’t really take companies on the West Coast into consideration. A treasurer for a major retailer said that neither his receivables nor his payables group want to use Same Day ACH. “They see no advantage to it whatsoever,” he said. “We’ve got stores on the West Coast that open up at 10:00 a.m., which is 1 pm on the East Coast. By that time, it’s hard to fit into the processing window.”

There is also still some trepidation around sending a payment faster. “We talked to our bankers about it and they told us that it’s not an automatic feature; you can opt in or out. We have told the banks that we want to opt out,” the retail treasurer added. “There’s fear that someone might push the wrong button and mess up our cash position.”

Lastly, and perhaps most unsurprisingly, the $25,000 threshold on transactions is also keeping some corporate treasurers away from Same Day ACH, noted another treasurer.

Given the group’s feedback, Sullivan asked them whether they are planning to adopt The Clearing House (TCH)’s Real Time Payments (RTP) system when it launches later this year. “From the stats I’ve seen from The Clearing House, they’re expecting a huge migration,” he said. “I’m curious to hear your thoughts on real time.”

No practitioners in the group had any response. It’s important to note that TCH plans to increase the threshold for RTP from $25,000 to $100,000 within a year of its launch and payments will be settled immediately, 24 hours a day. So if corporate treasurers aren’t enthusiastic about that new system either, maybe it’s a sign that the old methods aren’t doing such a bad job.

Same day stats

Sullivan provided statistics on Same Day ACH. From the service’s launch in September 2016 through the end of March 2017, there have been 26.3 million transactions—approximately 204,000 per processing day. About $34.5 billion has been transferred, an average of $1,307 per transaction. “And we did see a 13 percent uptick in overall Same Day ACH volume from fourth quarter 2016 to first quarter 2017, so we think momentum is gathering,” said Sullivan. 

Additionally, Sullivan shared that NACHA has seen robust use of Same Day ACH by businesses.  Almost 90 percent of Same Day ACH volume involves a business, whether it is business-to-consumer transactions, consumer-to-business transactions or business-to business transactions. However, NACHA has also observed that, so far, mid-level industries have been more adaptable to Same Day ACH than large corporates.

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