Pub. 17 2020 Issue 4

Issue 4 • 2020 19 O V E R A C E N T U R Y : B U I L D I N G B E T T E R B A N K S — H E L P I N G N E W M E X I C O R E A L I Z E D R E A M S financial institutions in the Eastern U.S. A number of us petitioned Nacha to approve processing schedules more favorable for financial institutions and their customers in the Mountain, Pacific, Alaska and Hawaii time zones. Beginning March 2021, a new process- ing window will allow financial institu - tions to send ACH transactions to the Fed as late as 1:45 p.m. Pacific time (PT) for settlement at 3 p.m. PT. This empowers the ACH network for a new set of custom- er use cases: • Direct Deposit for hourly, off-cy- cle, emergency payroll and termi- nation pay • Expedited bill payment for past-due or near-due obligations • Business-to-business payments, such as tax payments and merchant funding for settlement • Account-to-account transfers for moving funds between accounts at different banks • Person-to-person payments for gifting and personal commitments These enhancements to the ACH network enable banks to provide their customers with a range of new services. Businesses appreciate ACH payments because of the wide range of use cases that are supported, the lower cost of these payments, and the inherent secu- rity of the ACH network. Most business- es send and receive ACH payments today and have developed a high level of trust. Additionally, every financial institution in the U.S. participates, so there are no duplicate processes for in-network and out of network participants. Simplifica - tion of the process should not be under- estimated for businesses of all sizes. A 2019 survey conducted by the Cen- ter for Payments discovered that 75% of financial institutions in the U.S. offer Same-Day ACH services to business customers. An earlier survey of WesPay members showed that only half of the Western U.S. financial institutions were offering these services. We believe the initial early deadlines for submitting payments to the Federal Reserve and businesses’ inability to comply with these early cutoffs were the key reasons for lower participation rates in the Western U.S. We expect the ACH changes in 2021 and participation from banks across the West will result in service innovation. Same-day ACH supports both debit and credit entries up to a maximum val - ue of $100K per payment. The dollar threshold can accommodate 97% of all ACH business-to-business payments and a higher percentage of payments in other use cases. Nationwide, Nacha recognized 41% growth between 3Q 2020 and 3Q 2019 and nearly 94 mil- lion Same-Day ACH transactions were processed in the quarter. This is a solution with outstanding potential for growth and customer engagement. Follow the Trends So why are faster payments import- ant? Increasingly, consumers and small William Schoch is Pres- ident and CEO of WesPay, the nation’s oldest and one of the largest associations dedicated to helping mem- bers grow and improve their use of electronic payments. He is respon- sible for developing and implementing strategic initiatives to grow the association and provide maximum value to its 1000 members through in- formation, education, and advisory services. He was appointed to his position at WesPay in 2008. In 2016, Bill was the incorporator of WesPay Advisors, a wholly owned subsidiary of WesPay, which provides payments consulting in the areas of payments strategy, process improvement and payments regulation. He serves as a director and the secretary of the WesPay Advisors Board. Bill currently serves on the boards of WesPay, WesPay Advisors as board Secretary, and Na- cha. He also serves on the operations committee of the U.S. Faster Payments Council. He recent- ly served on the board of USA Technologies, the Federal Reserve’s Faster Payments Task Force and the steering committee for Nacha’s Pay- ments Innovation Alliance. Bill is a member of the American Society of Association Executives (ASAE) and the California Society of Associ- ation Executives (CalSAE). He is a frequent speaker on payments-related topics. businesses are turning to non-bank service providers for fast and innovative payment services. A streamlined user experience, trust in the service provid - er, and surety in funds flow are critical components to a successful solution. The emergence of non-bank payment solutions also provides a number of risks. It jeopardizes a bank’s relation- ship with its business customers and impacts its bottom line through lower balances and reduced fee income. Rev - enue diversification, especially non-in - terest income from business accounts, is critical in an extended low-inter - est-rate economy. Bankers have no shortage of options when it comes to emerging payment solutions. Expansion of ACH origination services by using new same-day features provides upside potential and aligns with businesses’ and consumers’ trends. n