Payment Modernization Strategies for Mid-Sized Banks: Preparing for 2025 and Beyond
Speed is a valuable commodity for everyday business and consumer use cases, and when it comes to time-critical business payments, same-day ACH is quickly emerging as a clear favorite. This faster payment method is being increasingly adopted for business payments that require speedy and reliable payments, particularly when it comes to time-sensitive transactions such as insurance claims, tax payments to avoid late fee and gig payrolls.
This payment option is gaining momentum in the B2C and G2C space as well, allowing for prompt payroll processing for gig workers and timely disaster relief payments. The Federal Government has enabled Federal disbursements of up to $1,000,000 using Same-day ACH. The U.S. Internal Revenue Service (IRS) has used it to send Advance Child Tax Credit (ACTC) payments to families quickly, giving a fresh breath of life to G2C payments.
In 2022, $2.1 trillion in claim payments related to healthcare moved on the ACH Network, an increase of 7.4% from 2021. Several medical and dental practices have turned to same-day ACH to ensure consistent cash flow and better financial forecasting. Businesses are embracing same-day ACH as a solution to reduce laborious and time-consuming claims processing. The head of a dental practice in Boston commented that same-day ACH has freed up their time and kept their cash flow healthy.
Using same-day ACH APIs, fintechs and platforms can offer their customers faster payment processing times, which can improve the overall user experience and increase customer satisfaction. Finzly Connect APIs give access to the ACH network through sponsor banks, including the ability to send/receive payments through same-day ACH.
In a recent press release, Nacha stated that in Q1 of 2023, 186.2 million same-day ACH transactions were processed, with a value of $565.3 billion. The increase in transaction limits resulted in a 94.7% spike in value compared to the same quarter last year, along with a 20.7% increase in volume. Nacha introduced late night ACH services in November 2022, allowing businesses to send payments for processing by 11.30 pm ET. Same-day ACH payments are not included in these files because they're processed in one of the earlier cycles in the day.
As several banks are moving towards central payment processing through hubs using smart-routing techniques to optimize speed and enhance customer experience, same-day ACH can serve as a reliable backup option in cases where banks are unable to receive payments instantly. Despite the imminent arrival of FedNow and RTP, which promise to achieve ubiquity over a period, same-day ACH still maintains its position as a rapid, cost-effective, and universally accessible method of transferring money.
It is no surprise that a recent BNY Mello survey showed that the majority of commercial businesses have expressed their interest in this payment method. It's safe to say that it will remain a key player in the payments landscape for years to come.
