Treasury Management Association of New York · 2018-04-14 · • Today’s “Game” Plan • Level Set the Rules for Same Day ACH (SDA) • Inbound/Receive ACH and Same Day –

Treasury Management Association of New York

Deep Dive: Same Day Automated Clearing House

June 2, 2016

Alex Romeo – VP The Clearing House Tom Lopes – SVP Citi

1

Established in 1853

• Two organizations within The Clearing House

– Payments Company (Three core products)

• ACH – Electronic Payments Network

• Wire – Clearing House Interbank Payments System (CHIPS)

• Image Exchange

• Clear and settle nearly $2 trillion dollars a day.

– Association

• Nonpartisan advocacy organization

• Represent interest of members on a variety of banking issues

2

The Clearing House Payments Company

Tom Lopes – SVP Citi Alex Romeo – VP The Clearing House

• Roots Date Back to 1812

• Over 200 Million Client Accounts

• Citi Banks High percentages of Fortune 500 Companies and Global Fortune 1000 Companies

• Global Capabilities – Over 160 Countries

• Wide Array of Products supporting the Complex Fortune 1000s to the Consumer and SMB Space

• ACH ODFI & RDFI, Direct FI & NACHA Board Member, Participant on RMAG

3

Citi at a Glance



• Today’s “Game” Plan

• Level Set the Rules for Same Day ACH (SDA)

• Inbound/Receive ACH and Same Day

– Examples of Options via Online Banking

• Originated ACH via Online Banking and Same Day

– Examples of Options in Online Banking

• Questions/Recap

4

Agenda


5

Role of NACHA & ACH Operators

Federal Reserve

• Operator of Payments Networks (i.e.

Fedwire, FedACH) • Leader/Catalyst of Payments

Improvement Efforts (i.e. Strategies Paper, Faster Payments Task Force, Secure Payments Task Force)

• Provider of Same-Day ACH Service

The Clearing House

• Payments Association and Payment

Network Operator

• Leader of TCH Real-Time Payments Initiative

• Participant in Fed’s Payments Improvement Efforts (i.e. Faster Payments Task Force)

NACHA

• Rule-Making Body in the ACH Network

• Leader of Same Day ACH Initiative

• Participant in Fed’s Payments

Improvement Efforts (i.e. Secure Payments Task Force, Faster Payments Task Force)


• Strategically, Same Day ACH is an immediate step we can take to

enhance the payment system, demonstrating that financial

institutions can work together to advance payments.

• Same Day ACH creates a foundation on which to build other services.

6

Why Same Day ACH?

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCM_m3Mfv1McCFYQ1PgodyLQGZw&url=http://www.clipartpanda.com/categories/working-together-as-a-team&ei=fRjlVY-0N4Tr-AHI6Zq4Bg&psig=AFQjCNGySxnwWP-Wnf7l2Mc5qE5ICQW-Lw&ust=1441163737552348


• Responding to Market Needs:

7

Why Same Day ACH?

• 71 million payments are made every day • Same Day ACH creates an “option”

– The choice of a premium service to make a payment faster

• Support the desires of your bank customers or credit union members


C2B

• Bill Pay

• eCommerce

• POS check conversion

• Merchant debit

• Collections

C2C

• Person-to-Person

• Account-to-Account

B2B

• Multiple uses, such as trading partner payments, due-date and late invoice payments

B2C

• Payroll

• Insurance, refunds

8

Major Use Cases of Same Day ACH are Projected to Generate 1.4 Billion Transactions


• Same Day ACH Use Cases

– Would your organization use or offer Same Day ACH

– for any of the 10 major uses cases identified in the proposal?

– 87.1% Yes

– 12.9% No

• Top 5 uses

– 87% - Payroll

– 72% - Business-to-business

– 59% - Account-to-account transfers

– 57% - Person-to-person payments

– 53% - Bill payments

9

Level Set on Same Day ACH


New Processing Windows

• Morning window – 10:30 am ET for file

submission; 1:00 pm ET settlement

• Afternoon window 2:45 pm ET for file submission; 5:00 pm ET settlement

Same Day Entry Fee

RDFI Requirements

• Fee paid from the ODFI to the RDFI to provide some recovery for RDFIs’ costs to make Same Day ACH a reality

• All RDFIs in ACH network required to receive same-day payments ‒Providing surety of

receipt

• Funds availability for ACH credits by 5:00 pm local time

Existing one-day and two-day ACH processing and settlement capabilities will not be impacted

10

Same Day ACH – a Ubiquitous, Faster Option


• Virtually all ACH transactions, including credits and debits, will be eligible for same-day processing

– Including ability to send addenda records with your ACH payment to provide for “straight-thru-processing”

• Non-monetary transactions – pre-notifications, notifications of changes, zero-dollar remittance information transactions, etc. – will

also be eligible for same-day processing

• International transactions (IATs) and large-dollar transactions over $25,000 will not be eligible for same-day processing

– Dollar limit is per-transaction, not per-batch

11

What Transactions are Eligible for Same Day ACH?


• Same Day ACH will be implemented in phased approach to help the industry acclimate to a faster processing environment, and to

ease the industry’s implementation effort - via three mandatory phases.

12

How Will Same Day ACH Be Implemented?

Functionality Phase 1 Sept. 2016

Phase 2 Sept. 2017

Phase 3 March 2018

Transaction Eligibility ($25,000 limit; IAT not eligible)

Credits only Credits and debits Credits and debits

New Same Day ACH Processing Windows

10:30 am ET and 2:45 pm ET



New Settlement Time(s) 1:00 pm ET and 5:00 pm ET 1:00 pm ET and 5:00 pm ET 1:00 pm ET and 5:00 pm ET

ACH Credit Funds Availability End of RDFI’s processing day End of RDFI’s processing day 5:00 pm RDFI local time


• To get on the Same Day ACH train, you have to have the right ticket and be at the station on time

13

How will Same Day ACH work?

The File must include current day’s date in the Effective Entry Date field (or stale/invalid date) and meet eligibility requirements for Same Day

The File must be received by the ACH Operator during one of the two Same Day Entry windows

Effective Entry Date of 161010

File received in Same Day window + = Same Day ACH Entry


• Handling of Effective Entry Date

14

How will Same Day ACH work?

Today’s date: Oct. 25, 2016 Batch EED: 161025

Batch submitted by 10:30 am ET

Batch settled 10/25/16, 1:00 pm ET Same Day Entry fee charged

Batch submitted by 2:45 pm ET

Batch settled 10/25/16, 5:00 pm ET Same Day Entry fee charged

Batch submitted after 2:45 pm ET

Batch settled 10/26/16, 8:30 am ET No Same Day Entry fee charged

ACH transactions that have stale or invalid Effective Entry Dates will be settled by the ACH Operator at the earliest opportunity, which could be the same day.


• All returns are eligible for same day processing, regardless of whether the forward Entry was Same Day or not

• RDFIs will not be required to send same-day returns; use of same day windows for returns is optional

• Dollar limit and IAT restrictions do not apply to returns

• Same Day Entry Fees will not be charged on returns

15

Same Day ACH: Return Processing

Entry settled on Tuesday, December 8. Settlement may have occurred at either 8:30 am ET, 1:00 pm ET or 5:00 pm ET

Return must be made available at opening of business on Thursday, December 10. RDFI may use any window during that time to return the entry


• Decide which Same Day ACH services will meet the needs of various customers or members

– Understand use cases and transaction eligibility

– Same Day ACH is an option – for both “which customers” and “which SECs” to support

• Ensure correct identification of same-day transactions

– Review effective entry dates used by corporates

– Decide if you will use the optional identifier

• Review corporate reports, Treasury Management and online banking systems for Same Day ACH integration

• Ask vendors and processors for their support

16

ODFI/originator Call to Action to Prepare for September


• Understand schedules for mandatory receipt of same day transactions

• Determine how and when to post received same day transactions and make funds available

• Review corporate reports, Treasury Management and online banking systems for Same Day ACH integration

– Talk with corporates about the need to post received Same Day ACH transactions to their internal accounts effective with Same

Day ACH settlement date

• Consider opportunity to accelerate returns

• Ask vendors and processors for their support

17

RDFI/Receiver Call to Action to Prepare for September


Receiving Same Day ACH

18

Everyone Ready?


Soon banks Will Start Getting In Intraday ACH Credits….

Are banks and receivers prepared to:

19

Receiving Same Day ACH

Receive Post

Report Communicate


• Get Same Day ACH items into the ACH and posting process

– Do banks have the staff awareness to handle on a daily basis

– Do you have the correct processes in place

• Make funds available per rules (End of Business Day)

– Can you memo post vs hard post (Batch vs Real Time)

20

Receive Same Day ACH: Receive and Post


• How will you let your customers and trading partners know?

• How will you get all the incoming details to your clients?

• How will you care for same day decisioned (Pos Pay) items?

• How will you alert customers to incoming intraday ACH items?

21

Report and Communicate


• Utilize reporting features on your online banking so customers can get same-day access to ….

22



• Typical ACH Activity Details Online provide enough details online so the beneficiary knows what the transaction was for…

Incoming Items Examples

01-25-2016 *Pending ACH ELECTRONIC DEBIT 52.00 Jan25 05:32a 0000 METLIFE PAYMENT

23

...including possibly the first addenda line for CCD+


• And then there’s this…CTX… with EDI 820 Data…

24

Incoming Item Examples

5200TEXAS COMPANY 1XXXXX000089CTXINV-PAYMTS 100XXXXX101021000026224290

622113111111000000000000722344000000720017426244772000 0010HEALTH FOR ALX I 1021000026228697

705ISA~00~0000000000~00~0000000000~ZZ~1746000089 ~ZZ~JPMORGAN CHASE ~100416~04000016228697

7059~U~00304~000000001~0~P~>\GS~RA~1746000089~071100269~100416~040948~0~X~003040\ST00026228697

705~820~000001016\BPR~X~72~C~ACH~CTX~01~071100269~~~1746000089~~01~113193532~DA~72200036228697

70514~100420~VEN\TRN~1~4334524\N1~PE~HEALTH FOR ALL INC~49~17426244772000\N1~PR~DEP00046228697

705T OF ASSISTIVE & REHABILITATIVE~75~538\PER~CN~~TE~8664400423\ENT~1\RMR~IV~01905100056228697

7054433~AI~18\REF~43~9S993594001\REF~CR~~EU020408 449298873 LAWSXXX,TERESA A\ENT~1\R00066228697

705MR~IV~0190627636~AI~18\REF~43~9S993595001\REF~CR~~EU026273 463313537 JACKSON,ALA00076228697

705N D\ENT~1\RMR~IV~0190709575~AI~18\REF~43~9S993596001\REF~CR~~EU030366 467807179 00086228697

705BA,GEORGIA M\ENT~1\RMR~IV~0190773607~AI~18\REF~43~9S993601001\REF~CR~~EU033943 500096228697

70573315759 MCRAE,STACIE L\SE~23~000001016\GE~1~0\IEA~1~000000001\ 00106228697

Need to Receive it….translate it…create output or 820 files…get the details to the client in a timely manner so they can give Downstream credit.


• Use ACH Positive Pay to make timely decisions

– Authorization rules need to be in place

– Processing times need to support new cut-offs

25



• Utilizing Alerting to help in communication of Intraday Items

26

Communicate


Originating Same Day ACH

27

Are You Ready?


You have customers who want to originate Same Day ACH Credits….

Are you prepared to:

28


Communicate Control Access

Process Report


• All This Stuff is Happening….

– Client Accessing Online ACH Origination and Sets Up payment batch

– Batch Is checked against Soft Exposure limit or Prefunded Hold

– Batch Must be Approved by Dual Business Approver

– Approved Batches must be extracted out of Online ACH

– NACHA formatted File Must be Handed off to Core Processor

– Core processor hands to ACH Operator (FRB/EPN)

– FRB/EPN Hands to RDFIs

29


Are you giving enough TIME…especially for the last train out of the station 2:45 ET?


• Have you set up new processing times and cut-offs?

• How will you let customers know? Ask your Bank in the coming months….

30

Originate Same Day ACH: Communicate

Update on ACH Processing Schedule

All ACH Payments with Effective Dates of today’s date should be submitted for

processing by 10AM and 1PM eastern for settlement today


• Are you going to charge a premium for Same Day ACH payments?

– Banks will likely Utilize a disclaimer or updated agreement or disclosure…

31

Originate Same Day ACH: Communicate

Note - Banks are being charged a premium…awareness of the fees is important!


• Will access to Same Day be limited?

– Are all clients defaulted “Y” – or will bank enable a setting for same day origination?

– Can setting be easily changed to allow in a pinch?

32

Originate Same Day ACH: Control Access

Remember that time is not our friend when there is a missed ACH Payroll file that needs to be processed ASAP for Same Day Processing


• Does Your Bank Support same day settlement today for “On US”

– Communicate to existing customers to ensure they understand the new rules

– Will you still let those customers send in files Same Day without the new rule validations

– What about customers who send in today’s date by mistake (Stale Dated)

• Today a warning in ACH Processing App occurs, but the file processes without issue for tomorrow’s date

• This can cause spit settlement (On Us vs Off Us)

• These clients will be impacted if they don’t correct their files

• Will this customer now be charged?

• Will they pay bennies early now in error?

33

Originate Same Day ACH: Control Access – Date Issues


34

Originate Same Day: Control Access

payment level validations


• Soft Exposure Processing…is it real time or after the file goes to the core ACH processing software (PEP PLUS for example) If not then

build in soft limit “over limit/Expires” Approvals into your timeline

• Is your back end soft credit limit engine smart enough to replenish the exposure amount when the offset settles Intraday ?

• If you are doing holds for Prefunding…is the back end smart enough to drop the hold as the batch offset settles same day? If not you

may cause false overdrafts.

• Consider not requiring a Same Day indicator in files/batches in the event of missed batches/file that require rapid turn around

35

Originating Same Day: Other Processing Considerations


• Payment Templates and Same Day Setting

– Does your application control settings for transactions not in scope (IAT, >$25K etc.)

– Are Originations aware of in scope and not (No Debits until 2017 for example)

• Gov’t Payments and Same Day

– The Federal Gov’t will not be participating in Same Day ACH for Phase One

– Is your application Caring for this – EFTPS?

– Are you communicating this? Be careful not to give the impression that SDA applies to items created via your online banking

template even if it allows same date entry in these cases

36

Originating Same Day: Processing


• Returned items from origination

– With faster forward items comes possibly faster returns

– Consider presenting returns (files, online) intraday

37

Originating Same Day: Processing


• Communicate, Communicate, Communicate!!!

• Access Control

• Process

• Reporting

38

Originating Same Day ACH Summary


Audience

39

Questions

Treasury Management Association of New York · 2018-04-14 · • Today’s “Game” Plan • Level Set the Rules for Same Day ACH (SDA) • Inbound/Receive ACH and Same Day –

Documents