Ubiquity, Same Day ACH and other Fast Payments
Time to Read: 3 minutes
It’s truly remarkable how this decades-old, ANSI based, batch based payment method is slowly but surely finding renewed vigor in today’s world of “fast payments.” Clients at Glenbrook continue to inquire about how ACH can be leveraged for their needs and a key reason is that it’s a ubiquitous payment network where every financial institution is connected (okay, and it is also often a lower cost option).
Same Day ACH is a perfect example of why ubiquity matters. It took 15 years for the original idea of same day ACH to become a reality and it may have taken another six for it to mature as a product but … it is now benefiting from the established ubiquity of the ACH network. Just look at the white hot increase of nearly 75% in transaction volume for Same Day ACH transfers in 2021. That amounted to just over 600 million transactions added to the overall ACH network transaction volume around 29 billion.
Don’t expect this trend to slow in the short term. Now that the maximum transferable value has increased to $1 million USD, many corporate and treasury management use cases are suddenly viable and the network effect will be even more powerful. Borrowing from the title of my colleague Nicole Pinto’s post last year – ACH Will Still Be Hot!
Same Day ACH may be more of a sustaining innovation than a disruptive one but it is remarkable how it allows the ACH network to flourish at the same time that there are multiple, even faster payment options in the market.
We don’t have comparable transaction volume stats for all the U.S. faster payment systems but we do know that Zelle had a great 2021 with transaction volume increasing 49% to 1.8 billion.
I expect some readers of this post may be asking why Same Day ACH and faster payments are mentioned in the same article. And that’s because in the U.S. context, Same Day ACH is often mentioned alongside the RTP network, Zelle, push to card transfers, digital wallets and a number of other payment networks as one of the “faster payments” payments available today. In 2023, we expect to add FedNow to that list.
Why? Because payment managers and corporate treasurers value the ubiquitous reach of the ACH network. A same day transaction may not be speedy enough for all consumer use cases but for many business needs, same day is fast enough.
For real time payments, the industry is looking for software providers to create ubiquity in the expected absence of interoperability between RTP and FedNow. This finding surfaced in research Glenbrook did for the U.S. Faster Payments Council (FPC) in which industry stakeholders expressed a pragmatic acceptance that FedNow and RTP would not interoperate and that neither payment system would itself achieve full ubiquity. Nevertheless, stakeholders are not willing to triage a payment between networks to find out which end user is on which network. Instead, they expect their software providers to manage this calculus for them.
If this is an interesting topic for your institution, join me along with Reed Luhtanen, Executive Director of the FPC and Lou Grilli, Innovation Strategist, at PSCU for a discussion on how interoperability, er, uh, ubiquity, is shaping how the industry thinks about faster payment options at the upcoming NACHA Smarter, Faster Payments conference in Nashville. I’ll be at the conference with my colleague Cici Northup. It will be fantastic to meet colleagues in person again and experience the vibe in this exciting time. If you’re also attending, let’s connect.
About the Author. Elizabeth McQuerry is a Partner at Glenbrook and leads the firm’s Global Payments Practice.