Full text of News from FedACH : Vol. 5, No, 3, 3rd Quarter 2008

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f e d a c h n e w s @ a t l . f r b. o r g

News from

3RD QUARTER 2008
VOL. 5, NO. 3

FedACH
2

The Financial Services logo, "FedACH,"
"FedACH International," "FedACH Risk,"
"FedLine," "FedLine Web," and "FedLine
Advantage" are either registered or unregistered trademarks or service marks of the
Federal Reserve Banks.

5

WEBINARS FOR
FEDACH SERVICES

Q&A: KEVIN REEVE
Hy-Vee and Back-Office Conversion

Complimentary Sessions

NEWS KIOSK
DID YOU KNOW?
WHAT’S COMING UP

3
3
4

CUSTOMER IN THE SPOTLIGHT

First Financial Bank
Offering Big Bank Services
with a Small Town Focus
ollow Interstate 20 to the geographic
center of Texas, and there you will find
Abilene, a center for modern aviation,
higher education, health care, manufacturing, retail, and—last but certainly not least—
banking. Playing an active role in Abilene’s
banking community is First Financial Bank.
Founded in 1890 as Farmers and Merchants National Bank, with a customer base
of more than 3,000 optimistic pioneers and
capital of $50,000, First Financial Bank now
has 12 branches in three counties in westcentral Texas. The bank belongs to a family
of locally directed community banks, all part
of First Financial Bankshares Inc., with more
than a century of tradition in Texas. First
Financial Bankshares Inc. is a $3.1 billion
financial holding company headquartered in
Abilene. Through this family of community
banks, First Financial Bankshares is able

F

to offer big bank services without sacrificing
the personal relationships and small town
focus that set it apart. It is this commitment
to quality that makes First Financial Bank
an obvious choice for the small businesses
that comprise the bank’s primary market.

ACH a Vital Product Offering
As we heard recently from Ben McAnally,
executive vice president with responsibility
for sales, product management, and customer
support for treasury management and correspondent banking, “ACH is a very integral
part of our treasury management product
offering.” With more than 33 years’ experience in banking, McAnally serves as the
chairman of the board for SWACHA—The
Electronic Payments Resource and also
serves on NACHA’s board of directors.
As McAnally explained, First Financial Bank
News from FedACH | 1

provides its customers with a Web-based
ACH system that includes a full range of
ACH services. Among the services most commonly used by First Financial’s customers
are direct deposit of payroll, cash concentration, check-to-ACH conversion, and the
FedACH International Mexico Service, also
known as Directo a México. While volume for
the latter remains relatively low, McAnally
has seen the bank’s international ACH volume grow as more small businesses engage
in international commerce.
The bank has gradually taken on origination of additional SEC codes for its customers;
however, the decision to do so comes only
after a thorough analysis of the customer as
well as any associated risks. According to
McAnally, “First Financial is willing to offer
all SEC codes to our very best customers.
Essential to maintaining this position is the

CUSTOMER IN THE SPOTLIGHT
fact that we are committed to knowing our
customers.” McAnally further explained that,
with a market consisting primarily of small
businesses, “customer visits are often more of
an educational effort and less of a sales effort.”
There are still small businesses that haven’t
yet realized the broad range of ACH services
that are available as well as affordable.

Treasury Management
and Sales Work Together
Within First Financial Bank, the ACH function is housed in the treasury management
area. Whenever a potential ACH customer
approaches the bank, treasury management
performs an in-depth risk analysis, profiles
the prospective customer, and assigns an
ACH risk limit. The relationship manager
then reviews the documentation and, if the
ACH risk limit is within the manager’s lending authority, the customer is approved for
ACH origination. If not the application is
taken to the bank’s senior loan committee
and, once approved, booked on the bank’s
loan system as an ACH limit. This way, any
time that customer’s total lending relationship
is reviewed, the ACH risk limit is reflected.
First Financial Bank works to grow its ACH
business through three dedicated sales representatives supporting 48 banking locations.
These sales reps have responsibility for
promoting treasury management products,
generating new leads, and coordinating with

relationship managers to market services to
existing customers as well as prospective customers. Sales goals are set and then reviewed
on a quarterly basis.

they need and, in many

that customers will get the answers they
need and, in many cases, a better understanding of the ACH rules.”
A visit to First Financial’s Web site makes
it clear that the bank is focused on offering
customers the best payments solutions—
direct deposit, ACH origination, and cash
concentration—to meet their needs. Increasing ACH volume is good for the bank and
also for the communities that it serves.

cases, a better understanding

Innovative Community Initiative

of the ACH rules.”

The bank also makes a positive difference
in its community through its “Pay It First”
initiative. This initiative engages a team of
employees who “believe in the importance
of showing kindness and service to others
through random acts of kindness.” In practice, a First Financial employee performs a
random act of kindness and encourages the
recipient of that act to do the same for
another individual. Stories of these acts of
kindness are posted on the bank-sponsored
Web site payitfirst.com.
Whether improving the efficiency of payments in the communities it serves or making
a positive difference in those communities,
First Financial Bank is successfully fulfilling
the optimism of those 3,000 pioneers who
first invested $50,000 with the bank nearly
120 years ago.

“. . . confident that customers will get the answers

Appreciative of the value that a regional
payments association (RPA) can bring to its
member institutions as they strive to grow
their ACH business and better serve their
customers, First Financial Bank works with
SWACHA several times each year to cohost
ACH seminars in the west-central Texas
region. McAnally describes these seminars as
“extremely successful on a consistent basis.”
Within its own walls, First Financial is
commited to educating its customers as well.
For customer inquiries, the bank has a phone
center to handle the most basic ACH questions. Should a more complex question arise,
customers are transferred to the treasury
management area. With a certified treasury
professional, and three accredited ACH professionals on staff, McAnally is “confident

Webinars for FedACH Risk Management and FedEDI Plus Services
If your institution has not yet activated its
FedACH Risk Management Services, or if
you simply want more information about the
new FedEDI Plus Service, there are two
remaining webinars before the end of the
year. Both events are complimentary and
require only that you register online at
https://events.frbservices.org/ep_web/Dsp_e
ventlist.cfm.
The final FedEDI Plus teleseminar of the
year is scheduled for October 29 and has a
registration deadline of October 23. Through

News from FedACH | 2

this teleseminar, you will learn how our
online, automated ACH payment data translation, reporting, and delivery capabilities
can benefit your institution as well as how
you can sign up for FedEDI Plus.
On November 5, take advantage of the last
FedACH Risk Management Services teleseminar of the year and find out how your
institution, whether as an ODFI or as an
RDFI, can use this suite of services to mitigate ACH risk. Deadline for registration is
October 30.

NEWS KIOSK

FedACH SALES SPECIALISTS
Each of these regional account executives is an ACH resource expert
and is dedicated to helping customers find just the right FedACH solution.
We encourage you to contact the sales specialist for your district.

In July, NACHA’s Council for Electronic Billing and
·Payment
(CEBP) released best practices for reducing
online bill payment exceptions (i.e., online bill payments
that cannot be posted accurately and promptly upon
receipt). As these exceptions represent a burden and an
expense for businesses as well as for payment processors, all parties can benefit from the CEBP’s best practices. For a complete listing of the best practices, visit
cebp.nacha.org/ExceptionProcessingMgmntProgram/
index.html.
July 31, 2008, NACHA’s board of directors extended
·theOneffective
date of the International ACH Transaction
(IAT) rules and formats for six months, to September
18, 2009. Return entries for transactions bearing the
SEC codes CBR or PBR will be permitted through December 31, 2009. The Federal Reserve Banks, along with
NACHA, strongly encourage financial institutions to have
all production software implemented by March 20, 2009,
the original effective date, and to use the six-month
extension for additional process documentation, testing
with FedACH, and customer education, training, and
testing. FedACH customers can schedule IAT testing,
starting in early November 2008, at FRBservices.org/
operations/fedach/testing_opportunities.html
you interested in helping us “go green” with News
·fromAreFedACH?
After years of mailing out tens of thousands of newsletters each quarter, we are planning to
take this publication to an all-electronic format in 2009.
If you would like to be included in our e-mail database
for the electronic newsletter, please send a request to
fedachnews@atl.frb.org. We also welcome your comments
and suggestions as they pertain to newsletter content
and ways in which we can make News from FedACH
even more useful and informative for your organization.

Atlanta

Nedelka Bell, AAP

954.436.2402

Boston

Jean Fisher, AAP

617.973.3218

Chicago

Mark Taylor

312.322.8449

Cleveland/St. Louis

Susan Bivens, AAP

901.496.0626

Dallas

Matt Davies, AAP

214.922.5259

Kansas City

Joni Hopkins, AAP

620.221.2712

Minneapolis

Steve Peterson

612.204.6949

New York

Thomas Goodman

201.531.3637

Philadelphia

Carol Chartrand, AAP

215.574.3414

Richmond

Della Tate, CTP

410.576.3384

San Francisco

Dorothy Williams, AAP

801.322.7948

DID YOU KNOW?
International ACH Transaction (IAT) Resource Center
In a survey conducted by the Federal Reserve Banks earlier this year, only 3
percent of the 453 respondents indicated that they did not need additional
training or information about the IAT SEC code. Recognizing our customers’
needs for more IAT information, we created the IAT Resource Center, which
is easily accessible via FRBservices.org.
The IAT Resource Center provides the results of the above-mentioned survey, allowing you to measure your institution’s readiness relative to similar
organizations. Also available in the resource center are the following:
checklists for ODFIs and RDFIs,
· Readiness
Frequently
questions,
· Materials forasked
software
vendors and service providers, and
· A 3-part audio presentation
titled “Understanding New Requirements in
· the ACH Network: International
ACH Transaction (IAT),” presented here
for those who may have missed the IAT teleseminars conducted throughout this year.
Visit the IAT Resource Center today at
FRBservices.org/eventseducation/education/FedACH_iat_resource_
center.html, and call your local FedACH sales specialist with any questions
you might have.

News from FedACH | 3

WHAT’S COMING UP

OCTOBER 2008

NOVEMBER 2008

Navigating Payments 23rd Annual Conference
October 9–10, 2008
St. Louis Park, MN
www.umacha.org

Payments Insights 2008
November 3–4, 2008
Wakefield, MA
www.neach.org

Mid-America Payments Conference 2008
October 28–29, 2008
St. Louis, MO
www.mpx.org

TechMecca 2008
November 3–4, 2008
www.swacha.org

Payments Summit
October 30–31, 2008
Columbus, OH
www.paymentscentral.org

The Institute of International Payments
November 18–20, 2008 Atlanta, GA
www.nacha.org

Dallas, TX

FedACH WILL OFFER IAT TOOLS TO RDFIS
When the newest SEC code, International ACH Transaction (IAT), is implemented on September
18, 2009, FedACH Services will provide RDFIs with two tools to assist them with IAT entries.
IAT Output File Delivery Sort
RDFIs and receiving points will have the ability to receive their IAT items in a file that is separate
from domestic ACH items. This functionality will allow receiving points and RDFIs to readily identify
IAT items so that necessary due diligence (i.e., OFAC screening) can be performed more efficiently.
The IAT receipt file will contain all IAT items destined to a particular RDFI, whether those items
came from FedACH International Services or from other ODFIs acting as gateway operators.
IAT Report in FedEDI Plus
FedEDI Plus will offer a report of all IAT items for a given business day at the RDFI and at
the customer level. The IAT report will identify results of OFAC screening, with transactions
sorted by settlement date. Consistent with existing FedEDI Plus functionality, the IAT report
will be available in various user-selected formats (e.g., PDF, TXT, and HTML).
To ensure that you have the latest information and updates on IAT, we suggest that you periodically visit the FedACH International ACH Transaction Resource Center located on FRBservices.org.

CUSTOMER SUPPORT INFORMATION
For FedACH Customers
in these Districts
Boston (1)
New York (2)
Philadelphia (3)
Cleveland (4)
Richmond (5)
Atlanta (6)
Chicago (7)

Central Operations
Support Site
Federal Reserve Bank
of Atlanta
1000 Peachtree Street, N.E.
Atlanta, GA 30309-4470
Toll Free: 866.234.5681
Local: 404.498.8902

For FedACH Customers
in these Districts

Central Operations
Support Site

St. Louis (8)
Minneapolis (9)
Kansas City (10)
Dallas (11)
San Francisco (12)

Federal Reserve Bank
of Minneapolis
90 Hennepin Avenue
P.O. Box 291
Minneapolis, MN 55480-0291
Toll Free: 888.883.2180

News from FedACH | 4

Question and Answer
Hy-Vee and Back-Office Conversion (BOC)
Since the 1930 opening of a small general store in Beaconsfield, Iowa,
by Charles Hyde and David Vredenburg, Hy-Vee has become one of the
top 30 supermarket chains in the nation. After 78 years in business, HyVee remains a privately-owned company with 224 stores in seven Midwestern states and approximately 54,000 employees. Known for excellent
service and low prices, Hy-Vee’s slogan of “A Helpful Smile in Every Aisle”
defines the company’s corporate philosophy. As one element of Hy-Vee’s
strategy to offer low prices, the company decided that electronification of
its customers’ paper checks was important.
With 27 years’ experience in Hy-Vee’s accounting department,
including the development of the company’s current cash management system, Kevin Reeve, assistant vice president and controller,
was responsible for moving the company to back-office conversion.
We talked recently with Reeve about Hy-Vee’s decision and its experiences with check electronification.
What circumstances prompted Hy-Vee to consider electronification of its customers’ paper checks? We are always looking for
cost savings and efficiencies. Electronification of checks benefits HyVee not only as a supermarket, but the decision to implement this
technology also helps us leverage our investment in Midwest Heritage
Bank, a Hy-Vee company. We see electronification as a way to speed
up the check processing cycle while lowering our costs.
Would you discuss Hy-Vee’s determination that back-office conversion (BOC) was the best solution? We originally experimented
with point-of-purchase (POP) conversion using a vendor. This
process slowed down our checkout lines, required training of our
cashiers, and did not yield any cost savings. As a result, that test ran
just three months. Back-office conversion offered the benefits of POP
without affecting our front end or requiring additional equipment on
the front end. With BOC, we had to purchase only one scanner for
each store and train two employees (one primary, one backup) on
how to prepare the bank deposit. We have also seen substantial cost
savings following the BOC implementation.
How has BOC implementation changed the workflow at Hy-Vee?
Previously, our store accounting people encoded the amount on each
check, added the checks up, and sent them to the bank with a deposit
slip. We then prepared an ACH entry to transfer the money to our concentration account. With BOC, the accounting people scan the checks,
review and balance the totals to the registers, and send the images
to the office. At that point, deposits from all stores are combined into
an image file and an ACH file, both of which are sent to the Fed for
processing with credit directly to our concentration account.

What sorts of training did Hy-Vee use to prepare employees for
BOC implementation? We did a one-hour webinar for our store
people. Training was easy, and they caught on quickly. Training office
staff required more effort as there are inherently more variables and
potential problems. Ultimately, we ended up with one person assigned
primary responsibility, another as backup, and an IT person who fully
understands the process.
How have customers reacted to BOC? Most of our customers do not
even realize that we’ve changed our procedures. We provide notification at each checkout and a takeaway of the notice if the customer
requests it. We also have an 800 number to call with questions. The
only difference customers see is on their bank statement when the
check they wrote is identified as an electronic item. And, of course,
they do not receive copies of their checks. We have encountered customers who did not understand the process, but once we compared
BOC to the way in which many utility payments are now handled—
accounts receivable entries (ARC)—they made the connection and
better understood BOC. For those customers who prefer to receive
their check back, we enable them to opt out of the conversion to ACH
so that they ultimately receive an image of their check.
Did Hy-Vee face any challenges in its BOC implementation?
I guess you could say that we are on the “bleeding edge” of this technology. Our solution involved purchasing the software and hardware
and running the entire process ourselves. We have had a number of
technical issues ranging from bandwidth to the stores to bugs in the
application to being undersized in our hardware needs. While we have
moved past many of these hurdles, we continue to face challenges. We
currently have 77 of our 224 stores using back-office conversion, and
until we stabilize the application, we will not add any more stores. It is
my understanding that Hy-Vee may be the first and only company to
use this particular configuration for BOC.
Any closing thoughts on Hy-Vee’s experience with BOC? Backoffice conversion has enabled us to reduce our payments processing
expenses. ACH transactions are less expensive than are paper checks,
and we have even been able to cut our armored car service from six
days to three days each week. Additionally, Hy-Vee gets returned checks
back in two to three days now rather than in one or two weeks. We do
not have the option of automatically resubmitting checks but we can
get them in our bad check system much more quickly and at a lower
cost. It is my personal opinion that back-office conversion is the best
way to clear checks. We have been successful in reaching our goals of
reducing banking fees and of clearing payments more efficiently.

News from FedACH | 5

2008 FedACH SERVICES FEE SCHEDULE 1

FedEDI PLUS SERVICE ENHANCEMENTS
By early October 2008, FedACH customers who have signed up
for the FedEDI Plus Service will notice several enhancements to
the service, including
return item report,
· AA new
new
of change report,
· Existingnotification
· printed, reports have been formatted to use less paper when
Historical data available to search for “on demand” reports
· have
increased from 10 to 60 processing days, and
Most of the improperly formatted EDI found in the ACH net· work
can now be translated into human-readable reports.
FedEDI Plus combines the online convenience of FedLine Web
and FedLine Advantage customer access solution functionality
with the FedACH EDI data translations that an RDFI’s customers
need. If your institution has not yet signed up for FedEDI Plus, and
you want to be able to generate reports on a recurring, automated
basis with associated backroom efficiencies, visit FRBservices.org
to find the following documents and materials:
FedEDI Plus Service Overview
Frequently Asked Questions
Sample FedEDI Plus reports
Customized value calculator
Online tutorial

·
·
·
·
·

Call your local FedACH sales specialist with any questions, or
visit the FedEDI Plus Service Setup page on FRBservices.org.

Origination
Items in small files (< 2,500 items)
Items in large files (> 2,500 items)
Receipt Items
Addenda Records
Web-derived Returns / NOCs
FedPhone-derived Returns / NOCs
Facsimile Exception Returns/NOCs
Information Extract File Subscription
Account Servicing
FedACH Settlement

FedACH Risk Origination Monitoring Service
Monitoring Criteria (per set of criteria)
For sets 2-20
$8.00 /Month
For sets 21-150
$4.00 /Month
For sets 151 and above
$1.00 /Month
Batch Monitoring
$.0025
FedEDI Plus
Scheduled Report Generated
On Demand Report Generated
Secure Delivery (e-mail)
FedACH International Services
Item Originated to:
Canada
Mexico
Austria, Germany,
Switzerland, United Kingdom
Return Received from:

Canada
Mexico
Austria, Switzerland
Germany, United Kingdom
Same day Recall of Item
– Canada Service

Item Trace - Canada Service
Item Trace - Mexico Service
1

FEDERAL RESERVE
RETAIL PAYMENTS OFFICE
1000 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30309-4470
RETURN SERVICE REQUESTED

$0.0030
$0.0025
$0.0025
$0.0010
$.30
$2.00
$15.00
$20.00 / RTN /Month
$25.00 /RTN /Month
$20.00 / RTN / Month

$0.20/report
$0.75/report
$0.20/e-mail

$0.0390
$0.67
$2.00
$0.77 (surcharge)
$0.69 (surcharge)
$5.00 (surcharge)
$8.00 (surcharge)
$4.00 /$7.00
$3.50 /$5.00
$11.50

Refer to www.frbservices.org for additional details

PRESORTED
FIRST CLASS
U.S. POSTAGE
PAID
ATLANTA, GA
PERMIT NO. 292