NACHA is conducting a survey of financial institutions to gain a better understanding of industry capabilities and capacity around the concept of developing more frequent and flexible processing and settlement schedules for the ACH Network. The survey builds on other sources of information, including a December 2010 survey of Regional Payments Associations’ financial institution members, and is intended to provide a deeper understanding of the potential benefits and costs involved in moving towards a more flexible environment. The survey was developed through consultations with Regional Payments Association, Direct FI Member, and ACH Operator representatives.
The survey provides four representative scenarios to enable respondents to evaluate the potential benefits of, and the level of development needed to support, more frequent and flexible processing and settlement windows. Each scenario includes questions from both the ODFI and RDFI perspectives. Although the scenarios are inclusive, they are representative of scenarios which financial institutions and their customers may experience. The survey also poses summary questions in which respondents are requested to consider holistically the potential benefits that more frequent and flexible processing windows could provide their respective institutions and customers — today and in the next few years.
Survey responses will inform NACHA’s ongoing evaluation of potential ACH Network enhancements.
Update: At the request of several Members, the online survey will be available until the close of business on Friday, May 6, 2011.
You may access the online survey directly via the following link:
The survey is also attached at the bottom of this news article in pdf form.
The combined impact of customer demand, expanding technological capabilities, evolving regulatory expectations of reduced risk exposure, and other market forces are driving financial institutions towards faster funds availability and shorter cycle times for all payment transactions. Advances like mobile commerce, Internet banking, and cross-channel integration are creating a growing demand for more flexible processing across all payment channels. The ACH Network is not immune to these forces and is considering how best to embrace them with enhancements to enable FIs to take advantage of new technology and respond effectively in the marketplace.
The current ACH settlement schedules (next-day or, for some credits, 2-day value-dated) have been in place with minimal changes for over 35 years. Various financial institutions and industry observers are now identifying a number of benefits that can accrue from more frequent and flexible ACH processing and settlement windows including:
• Opportunities for new value added services and product differentiation
• Potential sources of new fee income
• Enhanced customer service and retention
• Improved error correction capabilities
• Increased contingency and business continuity capabilities
• Load balancing and other operational efficiencies
• Cost avoidance (e.g., replacing teller line cash and check deposits with electronic deposits)
The utilization of more frequent and more flexible processing and settlement windows would also enable financial institutions to improve their own risk profiles, as well as that of the ACH Network. By reducing the duration of clearing and settlement exposure for forward and return entries, financial institutions can reduce counterparty settlement risk and risk-based capital adequacy requirements, and more effectively mitigate systemic and credit risk. Additional processing and settlement windows would also allow financial institutions to better manage operational risk by enabling more timely error correction and recovery from late or disrupted file processing.