ACH transfers are nothing new—they’ve existed for over 40 years. People use them for a variety of monetary transactions. ACH stands for Automatic Clearing House, and Nacha, once known as the National Automatic Clearing House Association, governs ACH transactions. Despite the long history banks have with processing ACH, transactions continue to see significant growth year over year. Banks processed almost $62 trillion in ACH payments in 2020 alone, an increase of over 8% from 2019.
Employee preference for direct deposit has driven much of the growth for company-to-employee ACH transfers. Employees have eschewed the traditional paycheck in favor of direct deposit, shortened the timeline between pay issuance and receipt. Regulations requiring ACH payments posted by the cutoff times provide security and stability for the receiving banks.
Less Money In Limbo
When a customer wants to move money from one account they own to a different account, same-day ACH means the money spends less time “in transit.” Nacha processes same-day ACH payments twice daily—the morning deadline occurs at 10:30 Eastern Time, and the afternoon deadline occurs at 2:45 ET, with settlement at 1 PM and 5 PM.
Nacha processes the vast majority of all US-based credit and debit payments the same day now if processed as ACH, except for payments over $100,000. These higher payments constitute less than 1% of all eligible ACH transactions.
Past Due
By allowing clients to execute bill payment via ACH transfer up to the same day the payment is due, clients can save a significant amount of money by preventing past due fee charges. This payment flexibility is a huge advance in taking control of personal finance.
One other important issue that ACH payments solve is helping to avoid missed and delayed payments because of an expired debit or credit card. By setting up an automatic ACH payment, a customer won’t have to worry about an expired card, because a bank pulls the payment directly from one bank and pushes it into another.
Same-day ACH payments mean a customer never has to panic at discovering his or her card has expired, leading to the possibility of incurring a late fee due to a delayed payment. All a person needs to take advantage of secure ACH payments is a bank account—no credit or debit card is necessary.
Payroll Precision
Anytime a business streamlines a regularly occurring process, it represents a potential cost saving for businesses. The market is growing more and more competitive and with much tighter operating margins, especially for small businesses and startups, so any extraneous cost trimming is beneficial for both the business and its employees. Because the card networks are not involved in ACH payments, moving money this way is less costly.
Additionally, the number of employees receiving a paper paycheck has plummeted. Direct deposits are more common than ever before. The process for ACH transfers is quick and inexpensive, which benefits a company’s operating margins and also provides employees with their secure earnings right away.
Consumer Costs
The cost to send an ACH transfer varies, but is generally far cheaper than a wire transfer, and usually safer as well. Most banks do not charge consumers a fee for ACH transfers, and if there is a problem or issue with the payment, an individual or bank can contest or reverse an ACH. Wire transfers are impossible to reverse and can cost as much as $75. The median cost of an ACH transfer is around $0.29. Using ACH transfers also eliminates the cost of printing checks and bills, and saves on postage.
Dynamic Banking and the Flexible Lifestyle
The traditional workspace is a thing of the past for more and more people who find themselves in non-traditional work roles, as remote work continues to expand in the jobs market, and as global networks become more and more commonplace for players regardless of size. However, changing workflows and offices are only part of the equation.
Many people are moving away from rigid life routines into a more flexible and adaptive way of living, and they are pulling banking along with them. Online and mobile banking continue to grow at a fast pace. Banks, both those which are digital and those which occupy both the digital and brick and mortar spaces, are more interconnected than ever. Improving the speed and process of bank-to-bank payments means that payees get the money they need when they need it.
Speed Limits
ACH is a US banking function. Neither consumers nor banks can make same-day ACH payments outside of the US at this time. The majority of Americans utilize ACH for “in-house” payments and deposits because it is an easy and inexpensive way to move money. Current regulations only permit certain banks to perform ACH transfers globally.
Modern Problems, Modern Solutions
Although the Covid-19 pandemic turned daily lives upside down for millions of Americans, the ACH Network keeps money moving safely and efficiently. Social distancing and stay-at-home orders mean fewer in-person trips to banks and other financial institutions, and people have turned to digital and online banking and ACH transfers to make payments.
Covid forced companies to shift gears and figure out how to run previously in-person offices virtually. As a greater number than ever before of the workforce transitioned to remote work, many businesses also updated and streamlined payroll, facilitating ACH payments to employees via direct deposit. Even as vaccinations roll out across the country and some workers return to a physical office, the remote workforce is still expected to grow, and cost-efficient, same-day ACH transfers continue to facilitate direct deposit payroll ensuring employees are always paid on time.
Time Really Is Money
At FirsTech, we realize our customers are busier than ever before, and same-day ACH transfers not only save money—they also save time. Less time spent making in-person payments, picking up a payroll check in person, writing checks, and even mailing a bill means more time and money available to spend on far more important things.