Financial Update (January-March 1999)


Cover Story

Default-Risky Securities

ACH Survey

New ACH Trends

Direct Payment

Board of Directors Announcements


Did You Know?

Data Bank

The Docket

New Federal Reserve ACH Trends

A s the use of electronic payments has grown, the Federal Reserve has sought to encourage even more banks and consumers to use these services. Additionally, the Federal Reserve has created a large Automated Clearinghouse (ACH) network that is not only cost efficient and responsive but also offers innovative services to customers and operators who contract with service providers to receive and process ACH items.

The Fed's ACH System

The Federal Reserve System provides the largest ACH network in the nation. It eliminates the need for a bank to process ACH items in more than one Federal Reserve district, resulting in lower costs for the bank. Banks that use the Fed's ACH system can

  • receive files as often as they like;
  • select a sorting option to meet business needs;
  • route each file to a different location, having certain files delivered to a FedLine¨ terminal and some delivered to other terminals;
  • provide customers with up-to-date information;
  • request an on-line trace to determine the disposition of an item; and
  • evaluate the number and dollar amounts of items available in queue to determine the need for on-demand file delivery, allowing flexibility in processing electronic payments.

The Fed also offers ACH services for customers who choose to contract with other service providers to receive and process their ACH items.

Recent Changes to the Fed's ACH System

There have been some recent developments in the Federal Reserve's ACH functions. Following a National Automated Clearinghouse Association rule change, in December the Federal Reserve introduced the ACH Information File Service, which delivers a duplicate ACH file to an alternate location so that electronic data interchange information can be translated or returns and notification of changes (NOCs) generated. The ACH Information File Service is available to Fed customers and to customers who contract with a service provider that does not offer financial electronic data interchange translation services.

Beginning Jan. 4, 1999, institutions were required to establish an electronic process as their primary method of returning ACH items and NOCs. This change eliminates the use of paper-based ACH return items and NOCs, thereby improving the presentment of return items to originating financial institutions. Also effective Jan. 4, the ACH large-dollar telephone return item processing was eliminated.

The recent innovations to ACH, combined with its increasing popularity, have led to a 16 percent increase in ACH volume at the Atlanta Fed over the past year, according to Deborah Bryant, section manager of the Atlanta Fed's ACH Central.