Well, it’s finally here – same-day ACH, also known as faster payments, has arrived in the U.S. Effective September 23, same-day ACH’s tighter processing deadlines are designed to support the same-day capabilities for virtually any ACH transaction, which will create more opportunities for businesses, governments and consumers who want to move their funds faster. Typically, before same-day ACH, fund transfers could take up to three days to complete, causing significant delays in payroll and business payments. However, do faster payments really create a better payments experience?
Payments expert Karen Webster, CEO of Market Platform Dynamics, said that faster payments should not only be about speed. “Sometimes they might need to be slower, and they always need to be flexible and smart, to accompany useful data and always be secure,” she said. But people like immediate gratification, whether it’s needed or not, which is what has made faster payments so attractive. Plus, with technology allowing practically everything else to happen instantaneously, why not payments, too?
Now that the first phase of faster payments has been implemented (phase 2 begins in September of 2017 and will concern debit payments and phase 3 goes into effect in March 2018 and will require that funds are made available by 5 p.m. local time; phase 1 only includes credit transactions), what happens now? Although consumers and most businesses are unlikely to notice any real difference, they will enjoy knowing that viewing their account balances will now reflect the current reality of their financial situations. Additionally, because debits are no longer dragged out as long as three days in settlement before they impact a bank account, same-day ACH virtually eliminates second-guessing when it comes to whether a customer has adequate funds before or after a debit. More noticeable changes will occur with phase 2, which will support consumer bill payment for utility, insurance, telecom, mortgage, loan and credit card payments, in addition to debit payments.
However, same-day ACH may also mean that conventional fraud protection measures are no longer adequate or effective. The near-instantaneous nature of faster payments means cybercriminals may be able to move funds more rapidly, and that financial institutions may have less time to review the validity of transactions. In the U.K., there was a £29.9 million surge in online banking fraud since it implemented its Faster Payments Service in 2008. Because the rule is being implemented in stages in the U.S., financial institutions can take advantage of the time between the two deadlines to prepare and shift their approaches to fraud prevention in the new faster payments environment.
As mentioned above, phase 1, which began on September 23, will involve only credit transactions, meaning financial institutions and their customers should look out for account takeover fraud, which is when cybercriminals redirect money transfers for legitimate payments to their own account by altering the account and routing number of intended payees. This can be prevented by the monitoring of outbound calls for new account and routing numbers, and suspending transactions automatically if they are found. The customer would then be notified of the suspicious transaction and given the opportunity to verify or deny the transaction in real time, eliminating the need for time consuming manual reviews and call-back procedures.
It is important to remember faster payments does not mean instant, real-time payments, but they are a vast improvement over the previous system, which stood in place for over 40 years and was struggling to keep up in today’s digital financial environment. While most people won’t notice anything, they may find it comforting to know their money and payments are being handled with previously unknown speed.