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US Fed delay slows same-day ACH payments progress

Faster payments progress in the US has been slowed after automated clearing house (ACH) governing body NACHA said that the launch of a planned third daily processing window for ACH transactions will be delayed by six months.

The window is a component of NACHA’s long-standing and ambitious efforts to facilitate same-day clearing and settlement of ACH transactions. Originally scheduled to go live on 18 September 2020, the start date has now been delayed by six months to 19 March 2021.

Reports suggest that the US Federal Reserve is behind the delay. The regulator notified NACHA that it needed more time to evaluate required changes to their system before giving it the green light. The Fed also said NACHA needed to open their decision to public comment, although NACHA said a third processing window was “overwhelmingly approved” by financial institutions last September.

According to a bulletin on NACHA’s website: “previously, the Fed board informed NACHA that it would need to issue a request for public comment about changes to Federal Reserve services prior to notifying the industry that it would support the new window. As of the date of this operations bulletin, that public-comment notice has not been issued, and the Fed board has not informed NACHA when that might happen.”

A 2018 NACHA rule for expanding same-day service calls for a six-month delay in such an event.

Long-standing plan

A third settlement window was part of the strategy unveiled by NACHA back in May 2015, when it announced the unanimous adoption of same-day ACH (SDA) by all US financial institutions. Phase three of that process, announced at that time, was to expand settlement windows to include three, including the one the Fed has now said it needs more time to study.

Once it goes live, the additional window will give financial institutions until 4:45 pm. Eastern time (EST) to submit transactions to the network. Banks, especially those in Mountain and Pacific time zones, strongly endorsed the change.

The window delay comes at a time when payments providers are trying to speed up their services. PayPal Holdings has just added a new service called Instant Transfer to Bank in the US, in partnership with JPMorgan Chase and The Clearing House (TCH).

However, many analysts suggest the delay will have no lasting effects, as same-day ACH volumes are already booming in the US. “In 2018, there were 178 million same-day transactions, an increase of 137% over 2017,” commented one. “NACHA anticipates little impact to continued adoption and usage of same-day ACH.”

Meanwhile PayPal’s new Instant Transfer to Bank –  available to PayPal customers in good standing – everages the company’s partnership with Chase, and Chase’s connection to TCH’s real-time payments (RTP) network, to move money instantly into the bank accounts of SMEs and consumers.

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