The Automated Clearing House (ACH) handles money transfers between financial institutions. This system is the backbone of the modern economy, allowing for credit, debit and other digital payments. ACH allows business to accept credit cards and submit the transaction for processing at the end of the day. It allows payroll to go out electronically. Dozens of essential business functions run smoothly due to ACH. Now, ACH will be faster than ever with the option of same-day processing.
ACH Rules Change
ACH management has announced a change in how they process payments. In a world where everything is moving faster, ACH payment processing is making changes to keep up. To that end, ACH has doubled their processing window. Under the old rules, banks and other financial institutions had only one window during which they could submit transactions. That meant anything processed after the deadline moved to the next day. Now, however, ACH offers two processing windows and will be adding a third during the next year. Extending the daily deadline for submissions means more transactions process on the same day.
What Does Faster Processing Mean for Businesses?
By adding same-day processing windows and offering multiple submission time slots, ACH enables better cash flow. A business can intake all of a day’s transactions on the day in which they occurred. This streamlines all functions from payroll to sales. Even account-to-account transfers happen more quickly, allowing businesses to rapidly address mistakes or accounting errors. Consumers can more quickly submit late payments or avoid late fees with same-day payments.
Same-Day ACH Rollout
Every year, $43 trillion in transactions move through the ACH network. Before the rule change, businesses waited anywhere from two to four days for the money to finally clear their accounts. Starting in 2016, though, everything changed. ACH rules mandated that all financial institutions received and processed same-day credits within that business day. Starting in 2017, the service extended to debit transactions and included debits along with credits. By 2018, credits submitted within the payment window must be made available to the recipient by the end of the business day.
Benefits and Challenges
As the system moves to faster clearing, businesses will likely face an uptick in the number of returned transactions and errors; however, this can be avoided through the use of ABA routing verification and account verification solutions. Faster processing also means that errors will be corrected more quickly. It’s important for businesses to be ready to handle the increased administrative load that goes with faster processing, as well as make sure they understand the fee structure. All same-day processing will be labelled in each settlement batch and assessed a fee specific to the faster processing time.