Posted by Checkbook on Jan 22, 2019
Understand Same Day ACH
Everything you need to know about Same Day ACH
Same Day ACH allows ACH transactions to be settled within the same business day. There are two submission windows and settlements during each business day.
- First Submission deadline at 10:30 am EST (7:30 am PST), settlement occurs at 1 pm EST (11 am PST)
- Second Submission deadline at 2:45 pm EST (11:45 am PST), settlement occurs at 5 pm EST (3 pm PST)
Each Same Day ACH transaction has a limit of $25,000 and the financial institutions that receive Same day ACH credit payment are required to make funds available to the depositor by 5 pm.
Background of Same Day ACH
It was proposed by NACHA back in 2014, with the objective of providing a faster and more efficient option for settling virtually any type of ACH transaction. NACHA believes that Same Day ACH will provide greater accessibility for businesses and individuals and creates opportunities for innovation and new payment options.
The usage of Same Day ACH has been growing rapidly since it launched in 2014. In fact, based on a report released by the National Automated Clearing House Association (NACHA), There were more than 5.6 billion US dollars worth of ACH payments processed in the third quarter of 2018. The volume for Same Day ACH has grown by 192% since Q3 2017. Online and Business-to-business (B2B) payments are responsible for most of the ACH payment volume increase.
The three phases of implementing Same Day ACH
Phase 1 (Sept. 2016): ACH credit was supported for the same day settlement. This provides a foundation to better support important use cases such as payroll, expedited billpay and person-to-person fund transfer.
Phase 2 (Sept. 2017): Same day ACH debits became available and it enabled consumers to set up reoccurring payments to pay their utility bills, mortgages, loans and credit cards.
Phase 3 (Mar. 2018): Funds transferred by Same Day ACH credit will be accessible after 5pm (in the recipient’s local time)
Future enhancements on (the capability of) Same Day ACH
Transaction data shows that Same Day ACH is thriving. Over 41 million were transferred in Q3 2018 which resulted in a 192% increase compared to Q3 2017. A few enhancements have been planned to adapt the growing needs of B2B payments.
- Starting on Sept. 20, 2019. Funds submitted through the first window 10:30 p.m. EST (7:30 a.m. PST) will be available earlier in the day.
- Starting on March 20, 2020. The limit for each same day ACH will increase to $100,000.
- Starting on Sept. 18, 2020. A third window will be available for Same Day ACH files to be submitted until 4:45 p.m. EST (1:45 p.m. PST). The settlement for entries submitted through this window will occur at 6:00 pm EST.
- Detailed description from NACHA
Impact of Same Day ACH
Same Day ACH is a big step forward for the ACH network, its impact is more pronounced in the following use cases:
- Same-day payrolls:
For business that needs to pay hourly workers, same day ACH allows employees to have faster access to their pay. In addition, Same Day ACH also provides flexibility for late and emergency payrolls.
- Business to-Business payments:
B2B payments can be time-sensitive. Same Day ACH enable faster settlement of invoice payments between business partners, and including remittance information with the payments.
- Expedited bill payments:
Same Day ACH enables consumers to make on-time bill payments on due dates, and providing faster crediting for late payments.
- Account-to-account (A2A) and Peer-to-Peer (P2P) transfers:
Same Day ACH provides faster crediting for consumers who move money among various accounts they own. Furthermore, Same Day ACH also help speeding up funds transfer on P2P payment services.
Questions that you might have
- Why does Same Day ACH credit have the earliest availability?
Compared to ACH debit, ACH credit usually has less return and causes fewer exceptions. Furthermore, it was designed to allow the industry to gain experience with same-day processing in a lower-risk environment.
- What is the processing fee for Same Day ACH?
Each Same Day ACH cost would result in a charge of 5.2 cents. The fee is collected by the ACH operator on behalf of the RDFIs to cover operation cost.
- Why are transactions larger than $ 25,000 not eligible for Same Day ACH?
Limiting the amount of transaction helps to mitigate potential risks, and the impact is small since most ACH payments are under $25,000.
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