Rich Crocco

‘Same Day ACH’ may be the Future of Electronic Payments

I’m hearing more and more about ‘Same Day ACHs’ and the idea might be a reality in the next year or so, therefore I thought I would explain the basics of the concept.

Generally U.S. companies have two basic options to execute electronic payments on a regular basis, wire transfer and ACH.  Wire transfers are executed directly between two banks on behalf of their clients. They can be costly ($15 to $35 per transaction) but are considered secure and settle almost in real time.  Wire transfers are effective for one-off payments or high-dollar transactions but are not something you want to use for recurring payments as the costs will most certainly outweigh the benefits of electronic payments in the first place.

ACH (Automated Clearing House) payments on the other hand, are much cheaper and are not executed directly between banks but are settled through the Federal Reserve. This is very efficient for financial institutions as there are roughly 80 million ACHs executed daily according to the article “Same-Day ACH and the Future of Faster Payments” from americanbanker.com and these payments can be aggregated by financial institutions with money transferred to and from institutions once per day rather than by transaction. While this is efficient for banks (and therefore cheaper for companies and individuals) it also comes with one byproduct, funds are settled and available on the next business day. Read more…