Nacha’s New 8 Amendments

Nacha recently announced that they are adopting eight new amendments to the Nacha Operating Rules governing the use of ACH payments in 2021. The changes are a part of an effort to modernize the ACH system through infrastructure improvements (such as same day ACH), and making ACH payments easier to use for consumers, businesses, and other organizations. This is yet another indicator that faster payments are gaining momentum across the U.S., and we can expect 2021 to be a big year for faster payments. 

Overview of the Changes

Included in the changes is an extension for ACH transaction processing. A third Same Day ACH processing window has been created that expands Same Day ACH availability by 2 hours. These extra two hours are actually very significant because it means that even more payments will accelerate in the ecosystem. Banks should start to look at their operations now to take advantage of the new processing window as this will go into effect next quarter on March 19, 2021. Other components of the new window include reducing administrative requirements associated with obligations to obtain or provide payment-related documentations, and adopting a specific timeline for financial institutions to handle claims of unauthorized payments. Finally, the new rules clearly define scenarios where reversing ACH payments are not valid, and enhance Nacha’s authority to enforce the rules for flagrant violations. 

The Demand for Faster Payments 

The backdrop for these new rule amendments is the fact that The Clearing House is also driving the demand for faster payments. Financial institutions that hold 70% of demand deposit accounts (DDA) now have access to real-time payments capabilities via banking technology providers connected to the RTP® network (the U.S. real-time payment system provided by TCH). In just three short years, 150 banks and credit unions have signed up to join the RTP® network, with many more expected to in the next 12 months. 

Even with the progress that both Nacha and The Clearing House have made to real-time payment adoption in the U.S., the Federal Reserve has been building market momentum for their upcoming FedNow service (24/7/365 interbank settlement) which is slated to come online in 2023. Just this month, The Fed announced the creation of the FedNow Pilot Program. The purpose is to support the development, testing, and adoption of the FedNow Service. financial institutions and payment processors will guide the evolution of the service offering. When it launches in 2023, it will operate alongside other payment rails and provide an additional infrastructure choice to support instant payments. The reach will be significant—over 10,000 FIs that already have relationships with the Fed will have the opportunity to integrate. 

Looking Ahead 

U.S. financial institutions still have some work to do if they are going to keep up globally. Although real-time payments transactions are estimated to reach $18 trillion by 2025 (a  growth of over 500% from 2020), the U.S. is lagging well behind our global peers, with  Europe, India, and parts of APAC leading in innovation. It is estimated that the U.S. will trail in adoption, with only 8% share of the global instant payment transaction values in 2025. There are plenty of hurdles that financial institutions must overcome to reach the promised land of real-time payments, which Alacriti will cover in future discussions. However, now it is possible to offer real-time payments without ripping and replacing your current payment solutions or re-organizing your operations and infrastructure. By partnering with the right fintech, financial institutions can achieve payments modernization and true digital transformation. 

To find out how you can provide real-time payments without the disruption of removing your legacy system, contact an Alacriti real-time payments expert today.