May 10, 2022

Taking a Look ‘Under the Hood’ of Same Day ACH


Michael W. Kahn

Michael W. Kahn


NASHVILLE, Tennessee—Same Day ACH only turned five last September, and as Michael Herd, Nacha Senior Vice President, ACH Network Administration, noted, that means “it’s still early.” After all, he said, from the time the ACH Network began “it took about 20 years to get to a billion payments a year.” But five is a good age to see how Same Day ACH is being used, who is using it, and think about what the next steps might be. 

At a May 3 Smarter Faster Payments 2022 session appropriately titled “Same Day ACH: Looking Under the Hood,” Herd joined Amy Smith, Vice President at The Clearing House and Executive Director of The Clearing House Payments Authority, to share new findings from a study done for Nacha and the Center for Payments.

One finding that stood out to Smith was that 52% of smaller financial institutions are using Same Day ACH for internal uses only, compared to just 3% of larger institutions.

“Based on asset size it appears that the smaller financial institutions were more interested in and more focused on augmenting their internal procedures—in most cases ultimately still supporting their accountholders—than the larger financial institutions, which were more focused on making same day origination available directly to their outside Originators,” said Smith. She also noted that 65% of institutions not currently offering Same Day ACH are, in fact, enabled to offer it. 

What enhancements did financial institutions think it would take to spark greater use of Same Day ACH? 

“The resounding No. 1 response was greater awareness of Same Day ACH benefits and access among corporate users,” cited by nearly two-thirds of respondents, said Smith. 

Longer file delivery and settlement hours was the second largest answer, cited by 31%, with another 19% saying weekend and holiday settlement—something Herd noted is currently impossible because the Federal Reserve’s National Settlement Service for interbank settlement is closed.

“I do think that as we move to a future of a more 24/7, 365 operating environment…that this is going to stand out more and more as a need and as something for the industry at large to address,” he said. 

While emergency payroll is a well-known use of Same Day ACH, Herd said there are other popular use cases. They include consumers both funding and withdrawing from cryptocurrency wallets, investment accounts, and P2P services; merchant funding for card payments; and credit card companies debiting consumers for bill pay. Herd also pointed to what he called one of the “hidden gems of Same Day ACH”: using it for returns.

“Only 39% of institutions are using the same day windows to return payments, and that really should be a lot higher,” said Herd. “From the receiving institution’s perspective, if you have a debit that has not posted or is not going to get paid, return it as quickly as possible. There’s nothing that says you have to hang on to that overnight and send it out for settlement the following morning.”

The study was conducted by Industry Insights, Inc., between Feb. 14, 2022, and March 11, 2022. It included 176 financial institutions ranging in asset size from less than $10 million to $25 billion or more.