Same-day processing a boon for the ACH

The ACH system, which for decades has been trying to attract business-to-business transactions, seems to be hitting its stride. The latest transaction data out of NACHA shows continued growth in B2B payments across the network, as well as ongoing adoption of same-day ACH.

So far this year, the ACH network has been used to process 597.6 million same-day ACH payments totaling $1.78 trillion, representing increases of 16 percent and 42.4 percent compared to the first three quarters of 2022, NACHA reported.

Same-day activity, however, remains a fraction of total ACH activity. In all, the ACH was used to transact 7.8 billion payments during the third quarter of this year. Included in that total were 212 million same-day ACH payments valued at $608 billion. That works out to a 20 percent increase in volume and a 27.1 percent dollar increase over the same quarter in 2022.

"The ease and convenience of same-day ACH has been embraced by the businesses and other organizations that use the ACH," said Jane Larimer, NACHA president and CEO. "The one-million-dollar limit and the three settlement times each business day make same-day ACH a great choice for faster payments."

Historically, ACH rules limited transaction values to $100,000. The limit was raised to $1 million in 2021 in an effort to attract more B2B transactions. In 2023's third quarter, 1.7 billion ACH transactions were identified as B2B, a 9.6 percent increase over the third quarter of 2022, NACHA said.

Other types of ACH transactions that are experiencing growth include claims payments to healthcare providers and Direct Deposit, NACHA said in a press release.

More faster payment options

The ACH, originally conceived as an electronic replacement for the check clearing system, has been hampered in attracting B2B activity for a variety of reasons including the batch processing nature of the network and low dollar limits. Both the addition of settlement deadlines and increases dollar limits have helped boost interest in the ACH.

There's a downside, though: ACH operations are limited to business days. If banks are closed, so is the ACH.

FedNow, the new payment network launched by the Federal Reserve in July 2023 has a more expansive operating schedule (24/7/365), with near instantaneous settlements. However, the transaction limit is $500,000 on FedNow, and the network can only be used for credit transfers. The ACH supports both credits (sometimes referred to as push payments) and debits (referred to as pull payments, which include automatic deductions).

FedNow competes with RTP, a real-time payment network built and operated by The Clearing House and owned by many of the nation's largest banks. RTP has been steadily gaining traction since it commenced operations in 2020. In the third quarter of this year, the network carried 64 million transactions worth a total of $34 billion, representing 11 percent volume growth and an 18 percent increase in the total value of transactions.

And on the day after Labor Day (Sept. 5, 2023) RTP—for the first time—handled over 1 million payments. "Surpassing 1 million RTP payments on a single day signifies the accelerating growth and demand for real-time payments," said Rusiru Gunasena, TCH senior vice president.

Some of the most common use cases for RTP, according to TCH, are:

• Payments to gig workers (earned wage access),
• Merchant funding,
• Account-to-account transfers,
• Digital wallets,
• Auto sales, and
• Title insurance/mortgage closing costs, like agent commissions and last-minute adjustments.

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