U.S. credit unions and banks have approved a proposal to allow consumers and businesses to send same-day electronic payments among the nation's 12,000 financial institutions, according to the industry organization that developed the idea.
The plan will result in upgrades of the decades-old automated clearing house network, which is used for everything from the direct deposit of paychecks to consumer bill payments to business-to-business transactions.
Today, under the best-case scenario, those payments settle the day after they are initiated. After the upgrades are completed, CU members and bank customers will have the option of using a same-day settlement window for weekday transactions.
Nacha, the industry group that oversees the ACH network, announced Tuesday that its voting membership has OK'd the proposal. It did not immediately release information about the vote count.
"The financial services industry has come together through private-sector rulemaking to increase the speed of payments," Janet Estep, Nacha's president and chief executive officer, said in a news release.
The decision marks a turnaround from 2012, when the industry group's voting members, led by the nation's biggest banks, rejected another proposal for same-day transactions. Even though the 2012 plan garnered the support of a majority of Nacha's members, it fell short of the supermajority needed for passage.
Nacha retooled the plan in early 2014, and the revised proposal garnered support from big and small financial institutions alike.
"Through dialogue, input and outreach, Nacha was able to balance differing perspectives and incorporate industry feedback from many types of organizations," Estep said. "The result of this dialogue is a final rule that will benefit consumers and businesses that need to quickly pay bills and receive funds faster."
The new rules call for the creation of two new same-day settlement windows, which means that funds would move among financial institutions three times per day — rather than once, which is how the system operates today.
All 12,000 or so CUs and banks in the United States would be required to accept the same-day payments on behalf of their customers. The same-day system is scheduled to be implemented in three phases, and to be completed by March 16, 2018.
The new rules include some changes from the version that was released last year.
Perhaps most notably, the final version calls for any CU or bank that initiates a same-day payment to pay an estimated 5.2 cents per transaction to the institution on the other end; the earlier version called for payments estimated at 8.2 cents per transaction, which drew objections from the Federal Reserve Board as too expensive.
The interbank payments would cover the technological investments that banks on the receiving end of same-day transactions would need to make to enable the speedier payments.
The final version also pushes back the first of the two new same-day settlement windows. Same-day payments would need to be submitted by 10:30 a.m. Eastern time and settled by 1 p.m.; under the earlier proposal, the submission deadline was 10 a.m. Eastern, and the settlement time was noon.
Critics have argued that even with the upgrades, the ACH network, which processes payments in batches, will still be too slow.
Same-day service will not be available for transactions initiated over the weekend or on a holiday. Meanwhile, many nations, including the United Kingdom and Sweden, have built near real-time payment systems.
Efforts to build a near real-time payment system in the United States are under way. One such initiative is being led by the Fed, while The Clearing House, a group that is owned by many of the nation's largest financial institutions, laid out its own vision for a faster payment system late last year.
"Same day ACH serves as an immediate action the industry has undertaken to modernize the payments system, and creates a building block for a variety of products and services," Estep said in Tuesday's news release.