Same Day ACH: Understanding Phase 1

Same Day ACH: Understanding Phase 1

We had been waiting for Sept. 23, 2016 because – we feel – it is/was a monumental day for the payments industry: The first day of the first phase of same day ACH (Automated Clearing House) transactions; the beginning of the movement to a single-day settlement.

With so many options for immediate payments, same day ACH is keeping payments by check relevant. And efficiency isn’t the only benefit.

Same Day ACH: What Does Phase 1 Entail?

Same day ACH is happening in three phases, the completion of which to take place in March of 2018, when U.S. banks are required to deposit funds submitted that day by 5:00 each business day.

As Phase 1 is currently in motion, merchants may not see a noticeable difference as it involves only ACH credits and transactions amounting to no more than $25,000 between two parties. Phase 2, effective Sept. 17, 2017, will incorporate ACH debits, while Phase 3 (Mar. 16, 2018) is the deadline by which banks must settle ACH transactions by 5:00.

How Does ACH Work?

Below is a step-by-step description of the ACH process by its governing body NACHA:

  • An individual, a corporation or another entity – the originator – initiates either a direct deposit or direct payment transaction using the ACH Network. ACH transactions can be either debit or credit payments such as direct deposit of payroll, Social Security payments or any scheduled or recurring payment (even a mortgage or bill payment).
  • In place of paper checks, ACH payments are entered and transmitted electronically, making transactions quicker, safer and more efficient.
  • The Originating Depository Financial institution (ODFI or bank) enters the ACH entry at the request of the originator.
  • The ODFI totals payments from customers and transmits them in bulk at scheduled intervals to an ACH affiliate.
  • The two central check-clearing facilities – the Federal Reserve or The Clearing House – receive collections of ACH entries from the ODFI.
  • The ACH transactions are sorted and made available by the ACH operator to the Receiving Depository Financial Institution (RDFI).
  • The receiver’s account is then debited or credited by the RDFI, according to the type of ACH entry.
  • Each ACH credit transaction settles in 1-2 business days, and each debit transaction settles in just one business day according to current rules governed by NACHA, but by 2018 will settle in the same day.

Why Instabill LOVES Check Payments

We offer check solutions to merchants for a simple reason: They keep merchants in business.

Instabill offers payment processing solutions for high risk merchants, who often deal with high chargeback rates and, as a result, sometimes lose their merchant account from their acquiring bank.

Check solutions keep those merchants in business. When a high risk merchant no longer has access to a merchant account, s/he can fall back on checks until they can secure a new merchant account.

Stay in Business – Open a Check Solution

If you’re a high risk merchant having difficulty with chargebacks and friendly fraud, Instabill has a suitable check solution for your business. Speak directly with one of our merchant account managers at 1-800-318-2713, or click the live chat option below.

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