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What Is Nacha?
Nacha is the steward of the electronic system that connects all U.S. bank accounts and facilitates the movement of money among them. The organization says that $55.8 trillion moved through its Automated Clearing House (ACH) Network in 2019.
Previously known as the National Automated Clearinghouse Association, Nacha is a non-profit association that is funded by the financial institutions that use its network. Nacha and the Interactive Financial eXchange (IFX) Forum merged in 2018, an international industry association that develops specifications for financial data systems.
KEY TAKEAWAYS
Understanding Nacha
The ACH network enables billions of electronic financial transactions, including direct deposits, Social Security and government benefits statements, electronic bill payments, person-to-person (P2P), and business-to-business (B2B) payments.
Importent: Nacha merged with the Interactive Financial eXchange (IFX) Forum in 2018.
Through its supervisory and rule-making functions, Nacha provides the foundation for electronic payment systems to operate effectively, while working to update technologies and implement new payment systems.
History of Nacha
Nacha was created in 1974 with the merger of several regional bodies. It was originally part of the American Bankers Association.
It has been instrumental in the development and standardization of such innovations as direct payroll deposit, electronic benefits deposit, and automated credit card transactions.
More recently, it has taken over the task of enabling the processing of B2B health insurance payments under the 2010 Affordable Care Act. Nacha now administers the Healthcare Electronic Funds Transfer (EFT) standard supports HIPAA-compliant transactions between health plans and providers that allow for information to travel with the payment, simplifying accounting procedures for providers.
The ACH Network
The ACH Network connects all U.S. financial institutions through a ubiquitous payment system that is built to securely and efficiently move money and information from one bank account to another.
Nacha develops rules and codes of business practices and is involved in the development of new applications. It also institutes and monitors quality- and risk-management controls.
Although it is not a government agency, Nacha works closely with various government agencies including the Federal Reserve, U.S. Treasury, and state banking authorities in order to ensure the integrity of the electronic payments systems used by U.S. financial institutions.
In 2014, Nacha formed the Payments Innovation Alliance as a voice for the payments industry and the ACH Network. The Alliance consists of hundreds of companies and organizations across the global payment ecosystem. It offers discussion, debate, education, and networking on such topics as payment system modernization, trends, standards, security, and ongoing innovation.
Text reads: "Examples of ACH Transactions: direct deposit of your wages; automatic payment of recurring bills such as energy bills, insurance premiums, and homeowners association dues; moving money from your brick-and-mortar bank to your online bank; payments from businesses to vendors and suppliers"
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Image by Catherine Song © The Balance 2020
Faster Payments
In November 2019, Nacha unveiled an initiative called the Faster Payments Playbook that aims to allow consumers to "pay anyone, anywhere, at any time with near-immediate funds availability."
Nacha also provides services in education and accreditation; industry engagement with financial institutions, businesses and government; and advocacy resources.
Nacha’s API Standardization Industry Group (ASIG) supports the advancement and use of standardized Application Programming Interfaces (APIs) within the U.S. financial services industry.
Same Day ACH: Moving Payments Faster (Phase 3)
New capabilities of Same Day ACH become effective over phases to allow financial institutions and businesses to acclimate to a faster processing environment, as well as to ease the implementation effort. Beginning March 16, 2018, RDFIs will be mandated to make funds available from same day ACH credits (such as payroll Direct Deposits) to their depositors by 5:00 PM at the RDFI’s local time.
The Rule enables the option for same-day ACH payments through additional ACH Network functionality, without affecting previously available ACH schedules and capabilities:
Originating financial institutions (ODFIs) are able to submit files of same-day ACH payments through two additional clearing windows provided by the ACH Operators (Note: The actual ACH Operator schedules are not determined by the Nacha Operating Rules.):
Virtually all types of ACH payments, including both credits and debits, are eligible for same-day processing. Only international transactions (IATs) and high-value transactions above $25,000 are not eligible. Eligible transactions account for approximately 99 percent of current ACH Network volume.
All RDFIs are required to receive same-day ACH payments, thereby giving ODFIs and Originators the certainty of being able to send same-day ACH payments to accounts at all RDFIs.
Learn more about Same Day ACH with our Resource Center.
Details
The Rule is based on a solid foundation of economic research on the use cases for Same Day ACH.
All consumers, businesses, government entities and financial institutions that use the ACH Network to move money between bank accounts will benefit from the option to move ACH payments faster.
Nacha projects that ACH Originators would generate approximately 1.4 billion same-day ACH payments annually as of ten years after full implementation and rollout, primarily for transactions that can be initiated before 2:45 PM ET on business days (not on weekends or holidays), and that do not require real-time functionality.
Using an expert, third-party economist, Nacha assessed 10 primary use cases for Same Day ACH. Significant use cases for Same Day ACH include:
1. Same-day payrolls, supporting business’ needs to pay hourly workers, and providing flexibility for late and emergency payrolls and missed deadlines; and enabling employees to have faster access to their pay in these cases;
2. Business to-Business payments, enabling faster settlement of invoice payments between trading partners, and including remittance information with the payments;
3. Expedited bill payments using both ACH credits and debits, enabling consumers to make on-time bill payments on due dates, and providing faster crediting for late payments; and,
4. Account-to-account transfers, providing faster crediting for consumers who move money among various accounts they own.
Technical
The following changes to the Nacha Operating Rules will become effective on March 16, 2018.
SUBSECTION 3.3.1.1 General Rule for Availability of Credits
For a credit Entry that is not a Same Day Entry, an RDFI must make the amount of the credit Entry received from its ACH Operator available to the Receiver for withdrawal no later than the end of the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.
For a credit Same Day Entry, an RDFI must make the amount of the credit Entry available to the Receiver for withdrawal no later than 5:00 p.m. in the RDFI’s local time on the Settlement Date of the Entry, subject to its right to return the Entry under these Rules, and except as noted below.
An RDFI in the Atlantic Time Zone must make the amount of a credit Same Day Entry available to the Receiver for withdrawal no later than 5:00 p.m. Eastern Time on the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.
An RDFI located east of the Atlantic Time Zone and west of the International Date Line must make the amount of a credit Same Day Entry available to the Receiver for withdrawal no later than the opening of business on the Banking Day following the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.
An RDFI that reasonably suspects that a credit Entry is unauthorized is exempt from these requirements, subject to applicable Legal Requirements. An RDFI invoking such an exemption must promptly notify the ODFI.
Impact
Same Day ACH Impacts by Party
ODFI Impacts
RDFI Impacts
Receipt of Same Day Entries is not optional for RDFIs. RDFIs should consider the following potential impacts:
Originators/Third-Parties
(c) https://www.nacha.org/rules/same-day-ach-moving-payments-faster-phase-3
Nacha is the steward of the electronic system that connects all U.S. bank accounts and facilitates the movement of money among them. The organization says that $55.8 trillion moved through its Automated Clearing House (ACH) Network in 2019.
Previously known as the National Automated Clearinghouse Association, Nacha is a non-profit association that is funded by the financial institutions that use its network. Nacha and the Interactive Financial eXchange (IFX) Forum merged in 2018, an international industry association that develops specifications for financial data systems.
KEY TAKEAWAYS
- Nacha operates one of the major networks that carries electronic financial transactions between banks and payments services providers.
- It is responsible for the rules and standards that are used to move money between accounts held at various types of financial or payments companies.
- Nacha is a non-profit association funded by U.S. financial institutions.
Understanding Nacha
The ACH network enables billions of electronic financial transactions, including direct deposits, Social Security and government benefits statements, electronic bill payments, person-to-person (P2P), and business-to-business (B2B) payments.
Importent: Nacha merged with the Interactive Financial eXchange (IFX) Forum in 2018.
Through its supervisory and rule-making functions, Nacha provides the foundation for electronic payment systems to operate effectively, while working to update technologies and implement new payment systems.
History of Nacha
Nacha was created in 1974 with the merger of several regional bodies. It was originally part of the American Bankers Association.
It has been instrumental in the development and standardization of such innovations as direct payroll deposit, electronic benefits deposit, and automated credit card transactions.
More recently, it has taken over the task of enabling the processing of B2B health insurance payments under the 2010 Affordable Care Act. Nacha now administers the Healthcare Electronic Funds Transfer (EFT) standard supports HIPAA-compliant transactions between health plans and providers that allow for information to travel with the payment, simplifying accounting procedures for providers.
The ACH Network
The ACH Network connects all U.S. financial institutions through a ubiquitous payment system that is built to securely and efficiently move money and information from one bank account to another.
Nacha develops rules and codes of business practices and is involved in the development of new applications. It also institutes and monitors quality- and risk-management controls.
Although it is not a government agency, Nacha works closely with various government agencies including the Federal Reserve, U.S. Treasury, and state banking authorities in order to ensure the integrity of the electronic payments systems used by U.S. financial institutions.
In 2014, Nacha formed the Payments Innovation Alliance as a voice for the payments industry and the ACH Network. The Alliance consists of hundreds of companies and organizations across the global payment ecosystem. It offers discussion, debate, education, and networking on such topics as payment system modernization, trends, standards, security, and ongoing innovation.
Text reads: "Examples of ACH Transactions: direct deposit of your wages; automatic payment of recurring bills such as energy bills, insurance premiums, and homeowners association dues; moving money from your brick-and-mortar bank to your online bank; payments from businesses to vendors and suppliers"
Image by Catherine Song © The Balance 2020
Faster Payments
In November 2019, Nacha unveiled an initiative called the Faster Payments Playbook that aims to allow consumers to "pay anyone, anywhere, at any time with near-immediate funds availability."
Nacha also provides services in education and accreditation; industry engagement with financial institutions, businesses and government; and advocacy resources.
Nacha’s API Standardization Industry Group (ASIG) supports the advancement and use of standardized Application Programming Interfaces (APIs) within the U.S. financial services industry.
Same Day ACH: Moving Payments Faster (Phase 3)
New capabilities of Same Day ACH become effective over phases to allow financial institutions and businesses to acclimate to a faster processing environment, as well as to ease the implementation effort. Beginning March 16, 2018, RDFIs will be mandated to make funds available from same day ACH credits (such as payroll Direct Deposits) to their depositors by 5:00 PM at the RDFI’s local time.
The Rule enables the option for same-day ACH payments through additional ACH Network functionality, without affecting previously available ACH schedules and capabilities:
Originating financial institutions (ODFIs) are able to submit files of same-day ACH payments through two additional clearing windows provided by the ACH Operators (Note: The actual ACH Operator schedules are not determined by the Nacha Operating Rules.):
- A morning submission deadline at 10:30 AM ET, with settlement occurring at 1:00 PM.
- An afternoon submission deadline at 2:45 PM ET, with settlement occurring at 5:00 PM.
Virtually all types of ACH payments, including both credits and debits, are eligible for same-day processing. Only international transactions (IATs) and high-value transactions above $25,000 are not eligible. Eligible transactions account for approximately 99 percent of current ACH Network volume.
All RDFIs are required to receive same-day ACH payments, thereby giving ODFIs and Originators the certainty of being able to send same-day ACH payments to accounts at all RDFIs.
Learn more about Same Day ACH with our Resource Center.
Details
The Rule is based on a solid foundation of economic research on the use cases for Same Day ACH.
All consumers, businesses, government entities and financial institutions that use the ACH Network to move money between bank accounts will benefit from the option to move ACH payments faster.
Nacha projects that ACH Originators would generate approximately 1.4 billion same-day ACH payments annually as of ten years after full implementation and rollout, primarily for transactions that can be initiated before 2:45 PM ET on business days (not on weekends or holidays), and that do not require real-time functionality.
Using an expert, third-party economist, Nacha assessed 10 primary use cases for Same Day ACH. Significant use cases for Same Day ACH include:
1. Same-day payrolls, supporting business’ needs to pay hourly workers, and providing flexibility for late and emergency payrolls and missed deadlines; and enabling employees to have faster access to their pay in these cases;
2. Business to-Business payments, enabling faster settlement of invoice payments between trading partners, and including remittance information with the payments;
3. Expedited bill payments using both ACH credits and debits, enabling consumers to make on-time bill payments on due dates, and providing faster crediting for late payments; and,
4. Account-to-account transfers, providing faster crediting for consumers who move money among various accounts they own.
Technical
The following changes to the Nacha Operating Rules will become effective on March 16, 2018.
SUBSECTION 3.3.1.1 General Rule for Availability of Credits
For a credit Entry that is not a Same Day Entry, an RDFI must make the amount of the credit Entry received from its ACH Operator available to the Receiver for withdrawal no later than the end of the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.
For a credit Same Day Entry, an RDFI must make the amount of the credit Entry available to the Receiver for withdrawal no later than 5:00 p.m. in the RDFI’s local time on the Settlement Date of the Entry, subject to its right to return the Entry under these Rules, and except as noted below.
An RDFI in the Atlantic Time Zone must make the amount of a credit Same Day Entry available to the Receiver for withdrawal no later than 5:00 p.m. Eastern Time on the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.
An RDFI located east of the Atlantic Time Zone and west of the International Date Line must make the amount of a credit Same Day Entry available to the Receiver for withdrawal no later than the opening of business on the Banking Day following the Settlement Date of the Entry, subject to its right to return the Entry under these Rules.
An RDFI that reasonably suspects that a credit Entry is unauthorized is exempt from these requirements, subject to applicable Legal Requirements. An RDFI invoking such an exemption must promptly notify the ODFI.
Impact
Same Day ACH Impacts by Party
ODFI Impacts
- Offering Same Day ACH products and services is optional for ODFIs. For those ODFIs that choose to offer Same Day products and services, the following impacts should be considered:
- Discuss new file submission and delivery schedules with ACH Operator
- Review and revise internal processing schedules and procedures to accommodate new windows for Same Day Entries.
- Review downstream applications and systems that may be impacted by Same Day Entries.
- Communicate with Originators and Third-Parties on Same Day Entries
- Determine customers and business models to offer Same Day
- Discuss proper use of the Effective Entry Date and impacts of improper Effective Entry Dates. Discuss alternatives if an Originator is not able to properly use Effective Entry Dates. If desired, discuss use of an optional indicator for Same Day entries
- Discuss eligibility requirements for Same Day Entries
- Develop procedures for holding entries that are received from an Originator in time for a same day window but that is not the Originator’s desire
- ODFIs will receive information from their ACH Operator regarding collection of the Same Day Entry fees.
RDFI Impacts
Receipt of Same Day Entries is not optional for RDFIs. RDFIs should consider the following potential impacts:
- RDFIs should discuss new file delivery schedules with ACH Operator
- RDFIs should review procedures and resources for processing files in the new delivery windows
- RDFIs should process entries based on the Settlement Date provided by the ACH Operator. RDFIs do not need to review Effective Entry Date or any other indicator to determine processing.
- RDFIs do not need to determine same day eligibility for processing.
- Determine whether to use the new same-day processing windows to send returns and NOCs. Returns will be allowed, but not required, to be processed on the same day. For a Same Day ACH entry, since settlement is one day sooner, the return deadline is also one day sooner.
- Phase 3 will require RDFIs to provide funds availability at 5:00 pm local time for same day credit entries.
- Review downstream applications and systems that may be impacted by Same Day Entries.
- RDFIs will receive information from their ACH Operator regarding receipt of the Same Day Entry fees.
Originators/Third-Parties
- Talk to your FI to determine if Same Day is appropriate and cost effective
- Discuss new file submission and exception resolution cut-off times
(c) https://www.nacha.org/rules/same-day-ach-moving-payments-faster-phase-3
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