A $1-Million Same-Day Cap Takes Effect As the ACH’s Latest Move in the Faster Payments Derby

A new, $1-million limit takes effect on Friday for same-day processing of automated clearing house transactions. The new cap, 10 times higher than the former one, is expected to open the ACH for faster processing of more large-value transfers and is seen as a landmark move toward faster payments as the Federal Reserve readies a real-time payments service to compete with The Clearing House Payments Co.’s RTP network.

The hike to $1 million as the new cap for same-day debits and credits comes 11 months after Nacha, the governing body for the ACH, announced its intention to make the move. The time since then has allowed financial institutions to make the system adjustments needed to accommodate the change, Nacha says. The original limit when same-day service began in 2016 was $25,000, a number many banks said at the time was too low to serve demand.

Same-day processing exploded in 2021, more than doubling to $944 billion in total transaction value over 2020, according to Nacha statistics. Transactions shot up 74%, to 604 million.

“The growth of same-day ACH in just over five years has been phenomenal as the payments community has welcomed this faster payment method,” said Jane Larimer, Nacha’s president and chief executive, in a statement. “Nacha has consistently heard requests to increase the dollar limit…Now, Nacha, the ACH operators, and banks and credit unions across the country are meeting the need for a $1-million limit.”

The latest move is also seen by some as a response to the effects of the pandemic, which channeled an increasing number of businesses into electronic transaction processing, including ACH. “During the pandemic, businesses and consumers shifted to faster payment methods and that trend is continuing,” says Jason Carone, senior vice president of ACH product management at The Clearing House Payments Co. LLC, in a statement.

And with a limit now 10 times higher, the ACH is poised to capture more payments from businesses that want faster processing for payments that were shut out by the former cap, observers say. “This is an interesting play by Nacha to get some of that activity that might have gone to ACH but can’t. The higher limit is going to attract more business-to-business large transactions. Some have been asking for this for some time,” notes Sarah Grotta, director of the debit advisory service at Mercator Advisory Group, a Marlborough, Mass.-based consultancy.

The measured pace at which Nacha has developed its same-day service, including the step-ups in the transaction cap, was a response to a felt need to ensure it could counter fraud in each case before acting, Grotta says. “Apparently, Nacha feels it has the right protections in place,” she says, adding, “at some time Nacha will probably get rid of the limit altogether, maybe in a couple years.”

While real-time systems are faster still, same-day service is suitable for many transactions, observers say. And while the Fed’s FedNow network is expected to add fuel to the demand for real-time processing when it goes live next year or in 2024, there will be demand for both same-day and instant service, observers say. “It’s not ACH versus real time. There’s room for both,” says Grotta. “But it is a competitive market. Nacha wants to be competitive.”