Deposit Sweeps
Deposit-sweeps programs are financial services offered by banks and financial institutions to help account holders manage their cash balances efficiently. The primary goal of deposit-sweep programs is to maximize the return on idle cash while maintaining liquidity and safety.
Some of your debit cardholders maintain large balances in their DDAs. Although the large balance provides a nice cushion for emergencies, the interest rate for a DDA tends to be fairly low. Other account holders may have a savings account with you that might return a slightly higher interest rate than the DDA.
Instead of earning smaller amounts of interest, Galileo Deposit Sweeps moves some of those funds into higher-interest investment accounts. Unlike some types of investment accounts, the funds in these higher-interest accounts can be readily available on demand. By partnering with IntraFi, you can earn higher interest and possibly get better FDIC coverage on accounts enrolled in Deposit Sweeps.
Any account type that can be an interest-bearing account—such as a DDA or savings account—can support Deposit Sweeps. Credit accounts are not eligible because they don't hold funds or earn interest for the cardholder.
What you can offer
You have several options when you integrate with Galileo's Deposit Sweeps.
- Let your customers opt-in to your higher interest-rate program, perhaps allowing them to decide how much to sweep from their accounts.
- Transparently enroll all of your customers in Deposit Sweeps. You advertise the higher interest rate as part of your default offering.
Account-holder experience
From the account holder's point of view, the swept funds do not move anywhere. For example, if the account holder has 1000.00 in an enrolled account, and the sweep threshold is 300.00, then 700.00 is swept into the higher interest-rate accounts. However, when the account holder views the account balance, it still shows 1000.00. The sweep is an automatic process that takes place behind the scenes without intervention from the account holder. Depending on how you've set up your program, the account holder may not even know that their funds are being swept into another account.
At any time, the account holder can withdraw some or all of their account balance, just as they could with an account that is not swept. The interest earned on the account is posted periodically, and if that interest is above the sweep threshold, it is swept into the higher-interest account, where it compounds the interest earned.
Therefore, account holders are aware only of interest paid to their accounts—they do not necessarily know that sweeps are taking place.
Deposit Sweeps setup
To enable Deposit Sweeps, you meet with these entities to make the arrangements:
- IntraFi
- Your sponsor bank
- Galileo
With IntraFi you determine interest rates, interest-payment schedules, sweep thresholds, methods of moving the funds, and other back-end processes.
Ledger responsibilities
If Galileo holds the ledger for your program, you tell Galileo which interest rate to set per product ID. According to that rate, Galileo calculates the amount to pay to each account, and on the designated day, Galileo deposits the interest into the customer accounts.
If you hold your own ledger, you are responsible for calculating and posting interest payments to your customers' accounts.
Interest is calculated every morning based on the account balance at the end of the previous day. See Interest calculation for details.
Data exchange
Deposit Sweeps depends on robust data exchange among all entities: IntraFi, your sponsor bank, and Galileo.
From Galileo
According to your product settings, Galileo sends IntraFi a list every business day of all of the balances and activity of your enrolled accounts. IntraFi determines which funds to sweep and then distributes the swept funds to the higher-interest accounts among its partner banks. The actual money movement happens between your sponsor bank and IntraFi according to the terms you have set. The movement is automatic—neither you nor Galileo performs the transfer.
Galileo also provides you access to data in these ways:
- The daily ISS RDF, which shows interest activity on all of your interest-bearing accounts.
- The Get Promontory Bank List endpoint returns a list of the banks where the account's funds were swept as well as the estimated accrued interest.
- The Posted Transactions RDF, which includes the interest payments with transaction code
PMMZ
. (This is the default transaction code: you can change the otype fromMZ
to something else, depending on your program needs.) - The
BPMT: pmt
event message informs you when interest is paid to an account.
From IntraFi
IntraFi sends information regarding estimated interest earned and swept-funds distribution to you, your bank, and Galileo.
Interest calculation
The interest earned as reported by IntraFi is an estimate that may have been calculated based on outdated data. Therefore, the interest earned as calculated by whomever holds the ledger (you or Galileo) should be considered authoritative. Keep in mind that the interest rate that IntraFi uses is not the same rate as the ledger-holder uses. When Galileo holds the ledger, Galileo uses the interest rate specified in the SAVIR parameter, which is set during initial account setup.
Galileo posts interest on the first day of the month, and the interest is calculated based on the account balance at the end of the last day of the previous month. For example, if an account balance is 5000.00 at 23:59:59 on May 31st, then Galileo calculates the interest on 5000.00 and posts it on June 1st.
IntraFi, however, posts interest to the account on the last day of the month, and in some cases the account balance changed between the last time Galileo sent the activity file and 23:59:59 on the last day. Therefore, the two interest payments cannot be reconciled until after Galileo posts the interest. Because reconciliation is performed only on business days, the respective balances may not be in sync until the 2nd or 3rd day of the month, if the last day of the month was a non-business day.
Deposit Sweeps process
This flowchart shows the process when Galileo holds the ledger.
This is how Deposit Sweeps works:
- The product is set up for Deposit Sweeps, and accounts created with the product ID are enrolled in the process either automatically or by opting in.
- You set up an FBO account at your sponsor bank that contains the pooled funds of Deposit Sweeps accounts.
- The account holder opens an account that is enabled for Deposit Sweeps. You call the Create Account or Add Account endpoint to create the account.
- The account holder funds the account.
- Every day, Galileo sends a file containing the daily account activity and end-of-day balances of the enrolled accounts to IntraFi and to your sponsor bank.
- IntraFi determines whether an account has exceeded the threshold. If it has, IntraFi sweeps the excess amount from the FBO account at your sponsor bank to the high-yield bank account.
- The account holder cannot see that the swept funds have been moved: there is no change in the ledger.
- The swept funds accrue interest.
- IntraFi sends you files to inform you of estimated interest earned by the account and how the funds were distributed to high-yield accounts.
- You receive interest paid from the high-yield accounts.
- At the end of the period, interest is paid to the individual accounts by the entity that holds the ledger, either you or Galileo. When Galileo holds the ledger, you receive a
BPMT: pmt
event message to notify of the interest payment. - When the account holder adds or removes funds, Galileo notifies IntraFi in the daily activity files.
- IntraFi coordinates the movement of funds between the high-yield account and your FBO account to settle the transaction.
Example
An account holder opens a savings account on your platform. The account is configured for Deposit Sweeps. The threshold is 200.00, and Galileo holds the ledger.
- The account holder deposits 1000.00 into the savings account.
- The next day, Galileo reports the 1000.00 deposit to IntraFi.
- IntraFi sweeps 800.00 from the account and deposits it in one or more high-yield accounts.
- You call Get Promontory Bank List for the account to see where the funds went. The endpoint returns the account number where the funds reside, the bank name, and the interest-rate tier at that bank.
- The 800.00 accrues interest at the higher rate.
- The account holder checks the balance, sees that it is 1000.00, and withdraws 300.00 from the savings account.
- The next day, Galileo reports the 300.00 withdrawal from the account to IntraFi.
- IntraFi removes 100.00 from the high-yield account. Now, only 700.00 is accruing interest.
- IntraFi moves the earned interest from that account into your account according to the schedule that you've agreed upon.
- At the end of the month, Galileo calculates the interest amount according to the rate specified in the SAVIR parameter. In this case the interest comes to 2.50. Galileo pays the interest into the account and sends you the
BPMT: pmt
event message withotype: MZ
. - The next day, the Posted Transactions RDF includes the interest payment of 2.50 with
TRANSACTION CODE/TYPE: PMMZ
. - The account holder checks the balance and sees that it is 702.50.
Galileo setup
Galileo sets these product parameters to enable Deposit Sweeps.
Parameter | Description |
---|---|
PROMP | Set to Y to enroll the product in Deposit Sweeps. |
PASWP | Controls whether to sweep primary and secondary accounts under the same aggregate ID. When set to Y, IntraFi treats all balances for these accounts as the same balance when dispersing funds. |
SAVIR | Specifies the interest rate to pay to the Deposit Sweeps accounts. Set this parameter when Galileo holds the ledger. |
SAVIT | Specifies the transaction type to use for interest payments. Set this parameter when Galileo holds the ledger. Default: MZ |
XTSWP | Controls whether Galileo sends account activity to IntraFi. Set this parameter only if SAVIR is not set. |
Updated 3 months ago