Raising the ceiling for faster payments was like bursting a dam for Yasser Abou-Nasr, who sees a chance for Dwolla, his payment company, to plug into an entirely new category of digital transactions.
"It unlocks a larger addressable market for us, with new companies and new industries for faster payments," said Abou-Nasr, senior vice president of product at Dwolla, which provides API connections to the ACH network and RTP instant settlement rail.
Nacha, which oversees the ACH rail, increased the same-day transaction limit to $1 million from $100,000 in March, following a hike in March 2020 from the original limit of $25,000.
The response to the more recent hike was immediate. In March 2022, same-day ACH volume totaled $115 billion, an increase of 42% from February, when volume was $81 billion. In April, same-day ACH volume was $177 billion, an increase of 54% over March. The average volume per same-day payment increased from $1,681 to $2,827, putting it just above the average of $2,679 for a standard ACH transaction, which has a limit of one penny under $100,000,000 per transaction.
"The expectation was that this increase would create some use cases and improve some other use cases for same day ACH, and that's happened," said Michael Herd, senior vice president of ACH network administration at Nacha.
The boost is coming primarily from business-to-business transactions, which tend to be larger than consumer payments and also address a need for improving supply chain finance, according to Herd.
"You may have a case where payments are due on delivery of a product, for example, and same-day helps with that," Herd said. Payroll and insurance disbursements are examples of how the higher limits can support transactions that involve consumers, he said.
Same-day ACH is one of several options to speed transaction settlement. The Clearing House's RTP rail offers instant settlement and is building bank support, while the government-based FedNow rail is under development. Same-day ACH is building momentum as a choice that's not instant, but still reasonably fast at less than 24 hours.
"ACH is really hot right now, we're seeing it grow on a hockey stick curve," Abou-Nasr said.
With the higher same-day ACH limit, Dwolla plans to approach insurance technology firms, construction companies, supply chain and logistics firms. These companies may not require instant payment settlement through the RTP rail, but could benefit from the slightly "less fast" same-day ACH, Abou-Nasr said.
Dwolla, which has roots in supporting a mobile wallet for digital payments, has gotten more aggressive in
But the instant rail has not reached the entire market yet. More than 200 banks are live with the RTP rail, which debuted more than five years ago, covering about 70% of U.S. checking accounts. But to date, overall bank adoption of RTP has been gradual, with banks often
Real-time billing, or request for pay (RfP), uses the RTP rail to support bill payment in near-real-time or at a specifically scheduled time. This category has attracted large banks such as Citigroup, Bank of New York Mellon, JPMorgan Chase and PNC Financial Services Group. But dozens of large banks and thousands of smaller financial institutions are not offering either RTP or RfP. As the economy slows, the banks expect that adoption to increase as a way to mitigate overdrafts. And the government-backed FedNow rail will not be active until 2023 at the earliest.
In an earlier interview,
Dwolla's Abou-Nasr said that while the preference is to move as much volume as possible to instant settlement rails, same-day processing can serve a wide market because the ACH network already covers more than 10,000 financial institutions.
"There's still a hesitation among some to move fully over the RTP. And there are other rails that are available for faster processing," Abou-Nasr said. "While the pace of RTP adoption may be slow, there's also the ACH rail that's expanding use cases with the higher daily ACH limits. It helps having parallel rails."
While the fees vary, same-day ACH costs about double the fee of a traditional ACH payment, but also about half of an RTP transaction, Abou-Nasr said.
"It's worth pointing out that even standard next-day ACH is still faster than a check, and standard ACH grew by almost 10% last year," Herd said, adding the 2021 standard ACH payments totaled $72.6 trillion.
RTP and same-day ACH can coexist, according to Gregory MacSweeney, vice president and head of communications for The Clearing House.
Same-day ACH may be the preferred method of payment if the sender is already accustomed to sending by ACH since they don’t need to change their process, MacSweeney said. But there are also reasons to favor RTP, he said.
"The RTP network also offers additional features not available on same-day ACH, such as immediate payment confirmation — so the sender knows the payment was received — and services, such as RfP, which enables bill pay," MacSweeney said.
