The nits and grits of Same-Day ACH

The Automated Clearing House is about to get a lot faster. In March 2018, the ACH network will be able to support Same-Day transactions between any two financial institutions in the US. Since this system is the backbone of the country’s payment system - processing over 90 percent of all funds transferred in the United States - it’s essential for everyone involved, from merchants to customers, to know what will change.

 

How ACH works

The ACH system is the primary network for electronic funds transfer in the US. Its sole purpose is to allow the transfer of regular and predictable payments without the need for paper checks.

An ACH transaction begins as a digital instruction sent from a customer’s bank to a merchant’s bank through the Federal Reserve, which acts as the clearing house. The bank receiving payments is required to process their backlog of instructions by 8:30 AM daily, which is a deadline called the “settlement window.”

Because the ACH network uses a rather dated system of electronic file transfer, the settlement window is the only time the customer’s bank can be sure the merchant’s bank has processed the ACH instruction. If a client makes an ACH payment at 9:00 AM on Monday, your bank will only process it at 8:30 Tuesday morning. Only then can you consider the transaction complete and official.

 

How Same-Day ACH works

In 2015, NACHA – the nonprofit body that governs the ACH system – decided to speed things up by moving forward with an initially proposed campaign called “Same Day ACH.”

Through this new scheme, ACH processing will involve two additional settlement windows; one at 1:00 PM EST, and the other at 5:00 PM EST. With three processing deadlines every day, your clients could send a Same-Day ACH instruction at 9:00 AM on Monday and the transaction would be complete by 1:00 PM the same day.

 

The impact of Same-Day ACH

Same-Day ACH processing doesn’t necessarily mean your recurring customers will be making instant or even Same-Day payments. It merely means that banks will support the ability to process outstanding payments three times a day instead of once. Although everything will process faster, not all transactions will be eligible to settle the same day.

Nevertheless, thrice-daily payments will mean faster business-to-business transfers and flexible bill payments. Even major payment processing companies like eMerchantBroker are supportingSame-Day ACH.

 

Same-Day ACH will be a choice

The last important thing to know about Same-Day ACH is that it’s an option that your customers may or may not adopt. Not all ACH payments will follow the Same-Day schedule. The network will still support the traditional one-day processing if the situation demands it.

But for the first time, the client can choose to have a transaction completed the same day, and merchants will be able to access funds paid through ACH in just a few hours.