If you collect more than $150 billion an
nually in consumer payments, what would it be
worth to you to invest even 10% of those funds one day sooner? That question challenged treasury staff at Capital One Financial Corp. The problem was that Capital One already was squeezing deposit float aggressively and converting incoming checks to ACH debits under the ARC program. To improve, treasury would have to get same-day availability on ACH deposits, and that seemed flat out impossible with batch processing.
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However, a tenacious treasury team brainstormed its way to an answer. What if the McLean, Va.-based company could strike a deal with some of the banks where large numbers of its customers had their checking accounts? What if it could send an ACH file directly to that bank and pay the bank a fee to transfer funds that same day from the customer accounts to a Capital One account and then sweep those funds into an overnight investment until Capital One could wire the funds to its concentration account?
Capital One's what-ifs soon became reality, inventing direct-send ACH. Although this means negotiating contracts with individual banks, the rewards outweigh the trouble, at least for a depositor on Capital One's scale. "We talked to a lot of our peers and, to our knowledge, nobody had tried direct-send ACH until we did," reports Steve Winston, vice president for corporate treasury cash operations.
Capital One expects to expand the program, but even at the current level, the company has been realizing a multimillion dollar net present value savings over three years.
Now that direct-send ACH has been discovered and proven to work, look for companies to follow Capital One's lead. "This project has sparked significant interest in the payments industry," Winston reports, "and may be the tipping point for expansion to same-day process- ing and availability of electronic payments."
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