PUB. 18 2021 ISSUE 3

Issue 3 • 2021 25 Source: Nacha, More to the Numbers: What the Results Tell Us, August 19, 2021 The ACH Network has long been an attractive alternative to checks because of lower processing costs and the inherent convenience of directly depositing funds to a bank account. Businesses are now seeing a related benefit in their internal processing. In the 2020 AFP Payments Survey, nearly half of the respondents claim that the straight-through processing of AP or AR and general ledger is the primary benefit of electronic B2B payments. The internal management and reconciliation of business proposals/ RFP data, invoices, payments, and remittance details are challenges for businesses, and electronic payments provide significant efficiencies. Another benefit of electronic payments is the improvement to cash forecasting, which has been a critical corporate treasury element during our recent cycle of uncertainty. Third: From Electronics to Faster Payments The digital migration of B2B payments ref lected in the recent ACH Network data may be part of a continuing migratory path. According to a survey by the Federal Reserve of over 2,000 businesses, 75% of companies consider the speed of money movement important and prefer faster payments. For those businesses that have adopted the ACH Network for B2B payments, recent developments make the ACH an attractive faster payments option. A significant ACH change in 2016 facilitated money movement the same day. In March 2021, this was further enhanced and allowed financial institutions to send ACH transactions to the Fed as late as 2:45 p.m. Mountain Time (MT) for settlement at 4 p.m. MT. Many community banks are exploring Same Day ACH as a service option for business customers. We expect the ACH changes implemented earlier this year, and the increased participation from banks across the Western U.S., will result in service innovation. Same Day ACH supports both debit and credit entries up to a maximum value of $100K per payment. The dollar threshold can accommodate 97% of all ACH B2B payments and a higher percentage of payments in other use cases. Nationwide, Nacha recognized 82% growth between 2Q 2021 and 2Q 2020, and nearly 149 million Same Day ACH transactions were processed in the quarter. This growth rate is double the growth rate in similar periods between 2020 and 2019. Also emerging is a new category of “instant payments” that allows the transfer of good funds between financial institutions in a matter of seconds. The Clearing House implemented the Real-time Payments (RTP) network in late-2017 and now has over 150 banks participating. RTP facilitates 24x7x365 push credit payments that are irrevocable after submission. In 2019, the Federal Reserve announced its intent to build a William Schoch is President & CEO of Wespay, the nation’s oldest and one of the largest associations dedicated to helping members grow and improve their use of electronic payments. He is responsible for developing and implementing strategic initiatives to grow the association and provide maximum value to its 1000 members. He was appointed to this position in 2008. In 2016, Bill was the incorporator of Wespay Advisors, a wholly-owned subsidiary of Wespay, which provides payments consulting and risk management services. He serves as a Director and the Secretary of the Wespay Advisors Board. Formore information, please call Bill at 415-373-1184, or email him at wschoch@wespay.org. competitive solution to RTP, called FedNow. The FedNow service is slated for implementation in 2023 and will include many of the same characteristics of the RTP service. In fact, both the Fed and The Clearing House worked extensively to align the messaging standards and optimize compatibility of the two services. Both organizations realize that most U.S. financial institutions are not resourced to build multiple new payment services. Both the FedNow and RTP solutions provide many of the benefits corporate finance professionals seek in their current operating environment and hold great potential for growth in the near term. Next: Future Investments When meeting with community bankers, I hear about the abundance of new opportunities and the challenges in determining where to commit the limited resources of time and money. These are never easy decisions but listening to our customers is typically a good start. Talk to your business clients and explore if their journey is similar to the one outlined here. Observed trends help to make those investment decisions easier and may support a client-centric ROI. n