ACH: Strongly navigating the headwinds in payments

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ACH’s dominance in value and volume has been unwavering. Recent studies from the FED[1] and NACHA[2] show that Same Day ACH is gaining foothold in volume and value, rising by 75.1% and 92.9% respectively in Q4 of 2021, with 169.3 million payments valued at $268.4 billion. 

This blog looks at how the 50-year old payment systems is navigating the headwinds in payments through a specific focus on new vertical-based use cases.

Acclimatizing to the digital demands

ACH is acclimatizing to the digital demands through rule updates around transfer limits and settlement times, making it a preferred payment modality for large and small enterprises alike. It offers:

  • Convenient settlements 4 times a day
  • Speed that can even pledge same day and next day settlements   
  • Increase in Same Day ACH per-transaction limit to $1 million, from March 18, 2022

B2B payments that moved to digital during the pandemic are here to stay digital. Bank-sponsored P2P payments are also being typically settled using ACH transfers. While check disbursements are dipping in volumes and digital wallet disbursements are growing, recent ACH numbers don’t indicate the dearth of ACH payments anytime in the near future. Although there has been some change in the payment mix of cards, checks, ACH based on the unfolding of the pandemic situation, the dominance of ACH, especially in the B2B space, is a clear protraction that is here to stay. 

NACHA's vertical-focused campaigns to promote value and volume have paid off with healthcare being a main contributor to ACH payments.mnew

Giving made easy with ACH

Religious donations is happening increasingly through electronic bank transfers. One church reported that more than half of the donations are given online, with 30% being set up as recurring electronic bank transfers using ACH. With new QR-based payment links that can easily be used by charities, educational and religious institutions, ACH is becoming a hidden power behind fundraising initiatives. NACHA claims that ACH donors also tend to donate more money, with an average of $1,700 in charitable donations over 12 months versus $650 for non-ACH donors.

Healthcare:

It is interesting to note that 70% of all healthcare claim payments are processed through ACH. In the dental industry, just 13% of claim payments are made by ACH, leaving a substantial untapped potential for the ACH network.

Subscription:

Subscription models are gaining popularity from coffee shops to software servicing. They encourage customer retention, thwarting the default 20-40% churn that comes with delinquency, especially caused by expired cards. ACH payments help convert initial subscribers into recurring subscribers due to the stability of payments offered by being tied to a bank account.

Are financial institutions responding to this surge?

Banks are improving the supporting technology for ACH operations to cater to the volumes and value surge on the ACH network. Robust automated account and payment validations can reduce the manual processes around returns and exception. Additionally, with changing rules from NACHA, banks appreciate payment systems powered by configurable rules. Above all, an agile payment plumbing that can cater to providing value at the point of consumption through value-added services in the likes of subscription, fundraising and invoicing is the next logical step towards embracing ACH volumes!

Banks no doubt have a leaf to take out of NACHA's focused efforts on promoting vertical-based payments!

Are you looking at modernizing ACH at your Financial Institution?

Payment Modernization with Finzly 

Source:

 [1] https://www.federalreserve.gov/publications/files/developments-in-noncash-payments-for-2019-and-2020-20211222.pdf

[2] https://www.nacha.org/news/nacha_fourth_quarter_2021_release

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