Break Away From the Pack: Next Day Funding Merchant Accounts

Undoubtedly, one of the hottest products in merchant services right now is next day funding. This product can make a significant difference in a merchant’s cash flow, as it delivers the funds from the prior day’s processing activity the very next morning.

Payment processors everywhere are using their programs to open doors, and are touting the benefits of their programs, which at first blush seem pretty similar. However, as you start to dig deeper, ask yourself these important questions so you can make sure you understand the critical differences and how they can impact the growth of your financial institution’s merchant services program.

1. What is the batch cut-off time?

Cut-off times for next day funding merchant accounts range from one payment processor to the next. In my market, what I typically see is a 6:00 EDT cut-off time, but Clearent’s cut-off time is 9:00 EST. Given the fact that most next day funding merchants are restaurants and other retailers that are open later into the evening, this means they would miss out on the benefit of having a later cut-off time if they were forced to batch out early.

As you can imagine, this works to the advantage of merchants who are seeking to earn interest income on their funds each night. I have a successful medical practice as a customer who makes extremely large deposits and the late cut-off time has allowed them to batch out later so they can reap the benefits of interest income much sooner.

2. Are the funds memo posted or are they a true ACH?

Some payment processors memo post the funds the next day, which means they show up as being in the merchant’s account, but they’re not truly available for important activities like purchasing inventory or meeting payroll. This is why it’s critical that you make sure your next day funding merchant accounts will receive actual ACH deposits the very next day.

Take for example one of my merchants, who runs payroll every Monday. Because his funds are hard-posted Monday morning (instead of being soft-posted or deposited on Tuesday), he has the confidence that his weekend sales volume will be waiting in his account, in preparation for paying his employees. This keeps his cash flow strong, his employees happy and also prevents him from having to delay payments to other vendors.

3. Does the account have to be with the sponsoring bank?

Oftentimes there are restrictions as to where the account must be housed. More specifically, some payment processors require that their next day funding merchant accounts be held at the processor’s sponsoring bank. How does this align with your financial institution’s loyalty goals?

As you look at the portfolio of services you offer to your commercial customers, make sure you understand how it stacks up against your competition. Are you providing your merchants with flexible products that will truly help their business run smoother?

Tell me about your experiences with next day funding. How has it helped your financial institution’s merchant services program?

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