Understanding the Various Payments Systems Series: Part 1
Over the last several years, the payments landscape has changed drastically with improvements in speed and convenience for consumers and businesses alike. There are now more ways than ever before to process transactions quickly and with ease.
When PayPal first hit the market in 1998, the idea of eWallets was introduced. Then in 2014, Apple launched their mobile wallet service, Apple Pay. Since then, there has been an insatiable appetite for fast, immediate payment methods, including Zelle, SquareCash, same-day ACH and most recently, The Clearing House’s real-time payments system, to name a few.
With so many payments methods, it can be confusing, especially when coupled with terms like “instant payments” and “push payments.” However, not all faster payments methods are equal.
As options increase, banks and credit unions, as well as their accountholders, must understand the key differences between each method and how each may impact payment delivery.
In this blog series, we will explore several key methods, including same-day ACH, Real-Time Payments and Third-Party apps like Venmo, and review the different use cases for each.
Growing Use of Same-Day ACH
The first method that is continuing to grow is same-day ACH. Introduced by NACHA for credits in 2016 and for debits in 2017, same-day ACH supports same-day processing of ACH payments. Prior to this, ACH transactions were settled the next business day.
This method has experienced rapid growth. In fact, recent transaction data from NACHA shows that during the second quarter of 2018, there was an increase of same-day ACH transactions by 243 percent when compared to the second quarter of 2017.
Moreover, NACHA recently approved three new rules to expand the capabilities of same-day ACH because of this growth, expanding the processing time for all ACH transactions by two additional hours and increasing the same-day ACH per-transaction dollar limit to $100,000.
Financial institutions and their accountholders will be better able to make use of same-day ACH with these new rules and expanded capabilities, such as more time during the business day to initiate a variety of same-day ACH payments, including payroll and bill payments. Extremely time-sensitive payments will also now be possible, such as emergency payroll.
Business-to-Business Payments Best Suited for Same-Day ACH
Transactions like payroll and other business-to-business (B2B) payments are well suited for same-day ACH, especially given the higher dollar limit. In fact, there is currently a high volume of same-day ACH transactions that are direct deposit for payroll and B2B payments. It is likely we will continue to see this trend grow, particularly among corporate account holders who operate during typical business hours and have less need to transact around the clock.
From Venmo to Zelle to same-day ACH, there are many payment methods available today. It can be overwhelming and confusing, making it crucial that organizations understand each method. To help navigate this confusion, our next blog will explore another payment method – Real-Time Payments.
For more information on how to keep same-day ACH payments secure, read our recent blog post, "3 Tactics Used by Fraudsters to Exploit Same-Day ACH."