In the payments world, the automated clearinghouse is not the brash, sexy movie star — but the established, well-received, lower-profile character actor.
Unlike peer-to-peer or crypto or even contactless payments, banks' business customers depend on ACH for their most basic, regular payments responsibilities precisely because the system is durable, consistent and battle-tested. In a word, according to the CEO and founder of First Internet Bank's technology partner Increase, Darragh Buckley: Boring. But as regular commercial payments slowly inch toward a real-time transactional future with FedNow and The Clearing House's RTP network, there still exists a tremendous need to provide business customers with a dependable, more visible and, yes, increasingly faster way to deliver the most essential payments, like employee payroll. Standard ACH payments can still take up to four days.
First Internet Bank of Fishers, Indiana, is stepping up to fill that breach with its "high-fidelity ACH" system, wherein the bank sends out test messages with each large payments file (like a "canary in a coal mine") to ensure when those transactions are being received by the Federal Reserve. In turn, this gives business customers a bird's-eye view to track those transactions via an application dashboard. Hence, the bank's business customers, such as Check and Ramp — which are piloting the service — can see exactly when payments clear, and reliably guarantee that their end customers (payroll recipients) are getting their money on time.
"In banking, there is something of an 'if it ain't broke, don't fix it' view," according to Nicole Lorch, president and COO of the $5.9 billion-asset First Internet Bank. But now, as ACH is finally getting a full facelift with high-profile programs aimed at making ACH payments same-day or instantaneous in some cases, there remains a basic need for payroll processors (and their payment recipients) to "know that the paycheck is going to land in the account when it's supposed to," she added.
First Internet Bank, which Lorch described as a "25-year-old startup" in its approach to innovation, has been working with Increase for more than two years in developing and rolling out an ACH system that helps business customers continue to reliably deliver their own payments on-time while offering a clear view of how the payments are progressing on an Increase-developed application and when they hit at the receiving depository financial institution, or RDFI. There have been "a series of improvements," according to Lorch, as the bank and the Bend, Oregon-based fintech startup have refined their approach and the technology.
"They're relentless. They're very quick and meticulous [in how] they address the solutions," Lorch said of Increase. "There's no sense of complacency."
For his part, Buckley of Increase sees his company's facilitation of ACH payments as more of a means of building improvement on the existing system, rather than trying to rip out the entire network and try to start anew. "No one really wants excitement in their payroll," said Buckley, who previously was employee No. 1 at digital payments giant Stripe. "We want it all to progress boringly [so that] the payroll client knows they have done their job [and] can sleep better at night."
