Why Same-Day Debit Is A Challenge And An Opportunity For Credit Unions

Credit unions can now offer speedier payments, but even those that don’t offer same-day settlements need to take note.

Top-Level Takeaways

  • The ACH same-day debit window opens Sept. 15, offering the chance for credit unions to promote speedier payments and overdraft protection.
  • Credit unions that do not process same day should work with processors and billers to avoid unauthorized early debits.

Rhonda Pavlicek doesn’t take anything for granted. Still, the senior vice president and CFO at TDECU ($3.1B, Lake Jackson, TX) says her credit union will be ready for the next phase of same-day payments on the country’s largest money rail.

Pavlicek is a board member for NACHA The Electronics Payment Association and E-Pay Resources and Friday, Sept. 15, is the day ACH debits become eligible for same-day settlement. It’s the second in a three-phase process that began on Sept. 23, 2016, with the addition of two windows to make ACH credit transaction settlements a thrice-daily affair.

Phase Three begins March 16, 2018, and will require financial institutions that accept those deposits to make funds available by 5 p.m. local time that day.

These changes speed up a payments network that NACHA says accounted for 25.6 billion transactions worth $43.7 trillion in 2016.


Data as of 06.30.17

HQ: Lake Jackson, TX
MEMBERS: 263,822
ROA: 0.43%

NACHA lays out its recommended action items and use cases and benefits for same-day debit in an online ACH operations bulletin.

The emphasis of Phase Two is on proper authorization language and effective entry dates. Benefits include the ability for financial institutions to offer same-day movement of funds, which is a good way to compete with real-time disruptors. Billers and merchants, for their part, can offer nearly real-time bill pay on websites as well as accept and convert paper checks on the same day.

The first phase ? accepting deposits three times a day ? was pretty uneventful, Pavlicek says. It required some changes in back-office workflow but had little impact from a member perspective. But that doesn’t mean TDECU is banking on an easy Phase Two.

Rhonda Pavlicek, SVP/CFO, TDECU

Just because the first phase was easy doesn’t mean we can take it for granted, the CFO says.

The first of a three-phase implementation goes smoothly as the venerable ACH Network ramps up payments speed. Read more.

TDECU processes approximately $300 million in credits and $200 million in debits a month. On the back end, it is changing many of its processes, including posting share draft clearings throughout the day instead of just at the end of the day.

Faster clearing of all debits could catch members off guard, so the big Texas credit union is publicizing the change through social media, statement messaging, website FAQs, and more.

We’re using this as an opportunity to promote other products and services, such as our line of credit loan and courtesy pay that give members additional overdraft protection, Pavlicek says. It’s about awareness. We’re going to be talking about movement of money and about how real-time balances will now be available for both debit and credit. ContentMiddleAd

Pavlicek suggests financial institutions reach out to their local Regional Payments Associations, such as ePay Resources, for more information and support.

Even credit unions that don’t plan to offer same-day debit settlement should prepare for the window opening. In particular, NACHA advices them to remain mindful of unintentionally processing same-day ACH debits.

We’re using this as an opportunity to promote other products and services, such as our line of credit loan and courtesy pay that give members additional overdraft protection.

Rhonda Pavlicek, SVP/CFO, TDECU

Glen Sarvady, former Fiserv CheckFree executive and McKinsey & Company consultant, agrees. No one gets upset if money shows up in their account a day earlier than they expected, he says. Now, money can get pulled out a day earlier. It’s fairly unlikely, but it can happen, and it can have a cascading effect for the members it happens to.

Sarvady, now managing principal of 154 Advisors in Atlanta and a payments expert with the Big Innovation Group credit union think tank, says those kinds of exceptions that cause costly debit transaction rejections can arise simply through dates getting messed up in files.

Previously, processors took care of that by simply putting in the next available date as a courtesy, Sarvady says, but that won’t work at credit unions that are taking advantage of the same-day debit settlement.

He advises credit unions work with their processors and with billers to ensure the member-owned cooperative has appropriate boilerplate language about terms and conditions. And, of course, work to correctly enter the proper dates.

Sarvady, like Pavlicek at TDECU, sees the potential for credit unions to be lulled by the ease of Phase One, but he notes the impact even for credit union that don’t make same-day debit available as Phase Two kicks in.

You don’t have to have a dog in the hunt to be suddenly affected, he says. Even if it didn’t happen on your end, you’re still going to have to deal with the resolution.

September 8, 2017

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