After one year of same-day credits, the Automated Clearing House has finally launched same-day clearance and settlement for debit transactions. And leading executives at NACHA say the network administrators are working on the final preparations. This time the goal is to ensure all financial bodies and corporates are ready for same-day debits— also known as Phase 2.
Phase 2 comes after same-day credit clearing which hit the market last year as Phase 1 of NACHA’s faster-processing strategy. Credits permit a user to move payments from his/her banking account to that of the receiver while debits allow companies, like billers, to draw funds from the customer’s account.
The move to ascertain that all parties in the network are geared up for same-day debit processing is very crucial because ACH debits are way chancy than credits. Though losses attributable to fraud are very low across ACH judged against other networks, the introduction of same-day debits gives way for this kind of mischief because it allows for movement of finances from the customer’s account without their consent. According to experts, increasing the processing speed significantly heightens the risk.
Another reason for painstaking preparation is to avoid would-be problems that may result from possible errors when keying in withdrawal dates. When debiting from an account, it’s important to post the funds to the account at the time when the account holder authorizes it.
Faster processing leaves very little time to spot such mistakes which exposes funds to possible withdrawal sooner than the account holder planned. However, same-day payments also mean returns pull in faster so you can easily notice if there’s a problem.
NACHA demands that all RDFIs (receiving depository financial institutions) carry out same-day processing, while for ODFIs (originating institutions), processing same-day debits is optional. With debit processing, the bank that receives houses the customer’s (payer’s) account. The ODFI holds the payee’s account.
All eyes are currently on ODFIs and how they plan to augment their systems to fight fraud and avoid dating errors. In a few months, we’ll have known if phase 2 is a success or a flaw.
Electronic payments expert, Blair Thomas, co-founded eMerchantBroker in 2011. His passions include writing/producing music, and travel. eMerchantBroker is America’s No.1 ACH company, serving both traditional and high-risk merchants.