Payments Hotline - 415-373-1200 Or [email protected]

Payments Hotline - 415-373-1200 Or Info@Wespay.Org

Same Day ACH Progress Report

Looking Ahead

Ryan Waterman, AAP, AVP, Risk & Regulatory Compliance

Ryan Waterman, AAP

ACH Audits, Hotline Calls, and Risk Management

AVP, Risk & Regulatory Compliance . Responsible for conducting ACH audit and risk assessments and providing risk and compliance education to WesPay’s members Served as Vice-Chair of WesPay’s Rules Advisory Council . Has over a decade of experience in community banks with a focus in the commercial banking and payments industry . Served on WesPay’s Risk Management Advisory Council

When he’s not working, you can find Ryan on horseback or floating on the lake.

© 2017 Western Payments Alliance. All rights reserved. No reproduction/distribution without prior written consent. 3 WesPay, as a Direct Member of NACHA, is a specially recognized and licensed provider of ACH education, publications and support. Regional Payments Associations are directly engaged in the NACHA rulemaking process and the Accredited ACH Professional (AAP) program. This material is derived from collaborative work product developed by NACHA ─ The Electronic Payments Association and its member Regional Payments Associations. This material is not intended to provide any warranties or legal advice, and is intended for educational purposes only. © 2017 Western Payments Alliance (WesPay). All rights reserved. NACHA owns the copyright for the NACHA Operating Rules & Guidelines. The Accredited ACH Professional (AAP) is a registered service mark of NACHA.

Functionality Phase 1 Phase 2 Phase 3 September 23, 2016 September 17, 2017 March 16, 2018

Transaction Credits & Credits & Credits Eligibility Debits Debits

Processing 10:30 am ET & 10:30 am ET & 10:30 am ET & Deadlines 2:45 pm ET 2:45 pm ET 2:45 pm ET

New Settlement 1:00 pm ET & 1:00 pm ET & 1:00 pm ET & Times 5:00 pm ET 5:00 pm ET 5:00 pm ET

ACH Credit End of RDFI's End of RDFI's 5:00 PM RDFI Funds Availability processing day processing day local time

1. Passenger needs right ticket for trip they want • Originator needs the right SDA format • Effective Entry Date = Today’s date (or stale date)

+ = S D A

2. Passenger needs to be at correct station on time • Originator submits file to ODFI by SDA deadline • ODFI submits file to Operator within SDA window

Stale Dated Items? Forward Credit & Return Entries?

Use Cases? Settlement Issues?

Functionality Phase 1 Phase 2 Phase 3 September 23, 2016 September 17, 2017 March 16, 2018

Transaction Credits & Credits & Credits Eligibility Debits Debits

Processing 10:30 am ET & 10:30 am ET & 10:30 am ET & Deadlines 2:45 pm ET 2:45 pm ET 2:45 pm ET

New Settlement 1:00 pm ET & 1:00 pm ET & 1:00 pm ET & Times 5:00 pm ET 5:00 pm ET 5:00 pm ET

ACH Credit End of RDFI's End of RDFI's 5:00 PM RDFI Funds Availability processing day processing day local time

» Late afternoon return window • Submission between 2:45 pm –4:00 pm ET • 5:00 pm ET distribution o Will contain returns only! • 5:30 pm ET settlement • “AJ19” application ID • Can include treasury or commercial items

» Low Risk Payments • Still possible returns » Consumer billing • Due date / late payments o Payments to prevent loss of service » Check conversion • Merchants and lockboxes » Collections » Business-to-Business • Just-in-time payments for release/shipment of goods • Invoice due date / late payments

» Recommended for all parties • Don’t assume because your business partner has tested that you are covered

» Include more than just file pick up • Posting • Downstream applications • Reconcilement with operator and accountholders

» Schedules provided by Operators

» Posting Timing & Order • Reputational risk for variable EOD times? • Posting order o Timing of returns o Expectations of consumers

» Settlement • Liquidity (visibility of future settlement position) • SDA returns impact

» Stop Payments • “Reasonable opportunity to act” shortens • Volume shift to Reg. E disputes (WSUD)?

» Reporting • Need for additional reporting to Corporate Receivers to provide visibility to SDA window volume o Positive Pay o Cash Management Reporting o Impacts to online & mobile channels • Corporate SDA Receivers must update records to indicate payment in “reasonable time” o Reliance upon RDFI for information

RDFI Call to Action

» Understand schedules for mandatory receipt of same- day entries • Operator delivery schedules will not change from Phase 1 » Determine how and when to post received same-day debit entries » Review corporate reports, Treasury Management and online banking systems for Same Day ACH integration » Communicate with corporate customers on file delivery including remittance and posting requirements » Ask vendors and processors about support

» Reversals • SDA can increase chances of original Entry and reversal posting same day

• Reversal cannot settle prior to original Entry o If ODFI creates reversal: code or procedures needed o If Originator creates reversal: what is ODFI’s control?

• Benefit of originating in 1st SDA window o Reversals can process in 2nd SDA window of day

» Reinitiations (Redeposits) • Will ODFI offer SDA reinitiations? o Value in redeposit posting ASAP? o SDA fee applies

» Balanced files • If settlement Entries sent to ACH Operator: o $25K per SDA Entry limit

» Language in e-check notifications that debit may clear same-day o ARC o BOC o POP o RCK » TEL • Notification of single TEL Authorization must be sent prior to settlement of Entry (revised Subsection 2.5.15.2)

» Originators should review disclosures & ensure they can provide same-day settlement to customers/partners

» Decide which Same Day ACH Debit services will meet the needs of various accountholders • Business vs. Consumer • Understand use cases • Same Day ACH is an option for both “which clients” and “which standard Entry class codes” to support » Ensure correct identification of same-day transactions • Review effective Entry dates used by corporates • Debits on Day 1 of Phase 2 implementation • Decide if you will use the optional identifier

» Communicate with corporate originators • Use cases • Correct formatting » Review corporate reports, Treasury Management and online banking systems for Same Day ACH integration » Discuss support options with vendors and processors

» Evaluate new opportunities to originate same-day debit payments • Same Day ACH is an option to discuss with your financial institution » Effective date needs to be accurate, even if you are not originating same-day transactions • Do not be an unintentional Same Day ACH Originator » Understand potential impact on cash position • Phase 1 limited to credits • Phase 2 includes credits and debits • Transaction limit of $25,000

Functionality Phase 1 Phase 2 Phase 3 September 23, 2016 September 15, 2017 March 16, 2018

Transaction Credits & Credits & Credits Eligibility Debits Debits

Processing 10:30 am ET & 10:30 am ET & 10:30 am ET & Deadlines 2:45 pm ET 2:45 pm ET 2:45 pm ET

New Settlement 1:00 pm ET & 1:00 pm ET & 1:00 pm ET & Times 5:00 pm ET 5:00 pm ET 5:00 pm ET

ACH Credit End of RDFI's End of RDFI's 5:00 PM RDFI Funds Availability processing day processing day local time

» Subsection 3.1.9 RDFI May rely on Settlement Date • RDFI may rely on Settlement Date of Entry, regardless of Effective Entry Date

» Subsection 3.3.1.1 General Rule for Availability of Credits • Remain unchanged from existing Rules • For Phase 3 – Same day credit Entries must be made available to Receiver for withdrawal no later than 5:00 p.m. in the RDFI’s local time on the Settlement Date of Entry

» NACHA’s guidance on “local time”: • “The Rule does not specify a required method of calculating “local time” in order to allow RDFIs flexibility in using a consistent standard that is most easily applied in an RDFI’s specific processing environment”

Funds Availability Same-Day Credits Effective: March 16, 2018

» Atlantic Time Zone • Puerto Rico, U.S. Virgin Islands • Required to make funds available to Receiver for withdrawal no later than 5:00 p.m. Eastern Time (6:00p.m. Atlantic/local time)

» Chamorro Time Zone • Guam, Northern Mariana Islands • Required to make funds available to Receivers for withdrawal no later than opening of business on the Banking Day following the Settlement Date of the Entry.

© 2017 Western Payments Alliance. All rights reserved. No reproduction/distribution without prior written consent. 28 Resources » WesPay Same Day ACH Resource Page https://www.wespay.org/WPA/WesPayPublic/Resources/Resource_Centers/Same_Day_ ACH/WesPayPublic/Risk_Compliance/Same_Day_ACH.aspx?hkey=93e83027-2a72- 4f74-bf5b-d43e472a4657

» NACHA Same Day ACH Resource Center https://resourcecenter.nacha.org/

» SDA Debits-Guidance for RDFIs https://resourcecenter.nacha.org/sites/resourcecenter.nacha.org/files/resource/Same-Day-ACH-Debits- Guidance-for-RDFIs.pdf

» FRB SDA Testing Information https://www.frbservices.org/files/communications/pdf/fedach/041817-samedayach- testing.pdf

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Payments Hotline - 415-373-1200 or [email protected]