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Financial Institution Questions
- What is the role of the regional ACH associations?
- Do I have to have a Federal Reserve account to originate ACH items?
- How does direct deposit settlement work?
- Why should I offer direct deposit?
- Will customers change financial institutions to begin direct deposit?
1) What is the role of the regional ACH associations?
Your regional ACH association is responsible for encouraging and facilitating the use of the ACH service. Regional ACH associations provide members with ACH rules interpretation, problem solving, education assistance, and marketing support.
2) Do I have to have a Federal Reserve account to originate ACH items?
No, you have a number of options for both processing and settling ACH items. If you use a correspondent bank, you may be able to originate and settle through your account with them. If you use either the Federal Reserve Bank or the Electronic Payments Network (EPN) for processing, you will settle your ACH transactions through your Federal Reserve Bank account or your correspondent account.
3) How does direct deposit settlement work?
Originating Depository Financial Institutions (ODFIs) are charged for ACH credit transactions. The accounting entries are passed on the date the originator designates as the settlement date.
4) Why should I offer direct deposit?
There are many reasons to offer direct deposit. You can:
- save on operating expenses because electronic transactions cost substantially less than paper transactions;
- offer a wider product selection to your customers;
- improve internal efficiencies and, therefore, customer service;
- be competitive with other financial institutions that offer direct deposit.
5) Will customers change financial institutions to begin direct deposit?
Because most financial institutions offer direct deposit these days, offering direct deposit is not considered an added incentive for most customers. If your competitors are already offering direct deposit, you could provide exceptional customer service to win customers over or bundle it with other customer incentives.