Same-day ACH: is anyone excited?
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22 May 2015
This week’s NACHA vote in favor of mandatory rules changes enabling same-day ACH settlement is no surprise. Some of the press coverage suggests this represents some sort of significant achievement. Really? By March 2018 (when the network is currently expected to be able to fully support systemwide changes) I predict there will be industrywide consensus on the inadequacy of the measure. Even proponents of the measure suggest the vast majority of ACH traffic will remain the next-day float-neutral type – for good reason. The majority of payments will not see a change for the same reasons the ACH has served the industry so well for so long. Specifically: • Dependability • Low-cost With this vote, we’re now going to burden this lowest cost of payments networks with perpetual, systemic cost increases for all participants. And we'll do so for a very small percentage of network volume. NACHA’s own estimates predict that by 2027 (I don’t make predictions that far into the future) a whopping 1.4 billion same-day payments. That’s 6% of 2014 ACH network volume - presumably a much smaller percentage of 2027 volume. NACHA estimates industrywide implementation costs of $118 million initially and $49 million annually. So, by 2027, the industry will have spent nearly $500 million so banks can offer customers a premium priced same-day payment option using the ACH when other, faster options already exist. I think the NACHA volume estimates are optimistic and find the characterization of same-day ACH as "modernizing the payment system" curious. What's modernizing about running the same batch system a few times each day instead of once each day? If demand is for real-time payments, this initiative will be found sadly lacking. It's like installing more pay phones as a way to compete with mobile devices. Am I missing something?