For those following the new rules towards the processing of ACH transactions, it’s no surprise to you that Same Day ACH will now apply to debit transactions in addition to credit transactions starting at the beginning of September. For those who perhaps haven’t been following this as closely (it’s okay, we understand), let’s back up and explain to you what this is all about and how it may impact you.
The Automatic Clearing House (ACH) is an electronic network that processes financial transactions in the United States. In short, if you didn’t use your debit/check card to move money but money was electronically deposited or withdrawn from your account, it moved using the ACH rails. ACH processes all electronic transactions except debit/credit card transactions. There are two primary ACH providers, the FedACH that processes about 60% of all ACH transactions and the Electronic Payments Network (EPN), a privately owned network that processes the other 40% of ACH transactions.
What is Same Day ACH and What Have I Missed?
The National Automated Clearing House Association (NACHA) is a governance group who manages the rules dictating the ACH movement of money. In an effort to expedite the movement of money, NACHA has introduced rules allowing two new settlement times, 1PM and 5PM, allowing banks to process ACH transactions during the day and again overnight during batch processing.
In September 2016, NACHA made rules available to the ACH networks to allow for same day ACH credits. From a consumer perspective, this may have meant that your payroll was available in your account sooner than prior to this rule shift. From a business perspective, businesses were able to receive money in their account electronically much sooner from those who purchased their goods and/or services. Receiving money faster is preferable and ideal, which is exactly why the networks started the Same Day ACH migration with credits and not debits. However, the credit side of the transaction is only one half of the transaction and until both sides are operating on similar schedules, the credit side will always be contingent on the debit side from a timing perspective. So, in short, Phase 1 had little impact on the expedited movement of money.
What happens in September?
Effective September 15, 2017, NACHA will make rules available to process Same Day ACH Debits. ACH Debits are primarily used by businesses to collect money from consumers or other businesses. Think about a gym – gyms have many members setup to make monthly electronic payments from their bank. In the background, the gym’s bank has a master template of all gym members and their associated bank card information from which they’ll draft the payment. Assuming gym memberships are due on the 1st of the month, the gym will automatically draft payments using ACH on the 1st that will process in a batch process overnight on the 1st. Thus, in effect, members accounts won’t see the debit from their account unit the 2nd day of the month. Following this example, as of September 15, 2017, the gym will now have the ability to process the debit transactions from their membership base using the Same Day ACH Rules, which means gym members will now see the transaction in the morning on the 1st of the month, not the 2nd.