By the time you read this, the nation’s automated clearing house network will have been processing same-day credit settlements for a little more than a week. That may not sound revolutionary, but in many respects, it is.
For one thing, the ACH has speeded up clearing time pretty significantly. Credit transactions, which are used, for example, in payroll deposits and person-to-person payments, can now settle the same day they’re initiated, instead of the next day or maybe even the day after that, which had been the ACH’s traditional timing.
For another thing, no other payments network in the country, not even, I’d venture to say, Visa or MasterCard, is as extensive as the ACH. Just about every financial institution, huge or tiny, is a part of the system. That means ubiquity of endpoints. Not only can transactions zip through faster, they can reach just about anybody you’re trying to pay who has a bank account.
Next up are ACH debits, which are used for such transactions as utility, mortgage, and credit card payments. These transactions will go same-day next September, and a third settlement window, to go with the two already added, will take effect in March 2018.
NACHA, the governing body for the ACH, has stressed that the new regime will actually move money faster, in contrast to real-time payments schemes that are really talking about zipping messages around a network. This, then, raises two related questions: Does the payments business really need a real-time payments system? Is same-day good enough?
At least some experts are starting to think that maybe it is. The ACH offers several advantages. It’s an existing network. It’s relatively inexpensive. It’s got that ubiquity of endpoints. And, by the time real-time networks finally get under way, same-day clearing will have had a substantial headstart, points out Sarah Grotta, director of the debit advisory service at Mercator Advisory Group and author of a report that argues that same-day may just be fast enough.
True, each same-day ACH payment does carry a 5.2-cent fee that is paid by originating institutions to receiving institutions and passed on, inevitably with a markup, to merchants and other originators (does that remind you of something?). Merchants grumble about that, but it was 8.2 cents in the original proposal, and Grotta thinks most smaller merchants will find it economical enough that it will make real-time systems prove the shaved hours are worth any extra cost.
So what about it? Is same-day fast enough? As with all other such projects, the market will render the ultimate verdict. But I’d say that while real-time may have the glamor, same-day may well carry the day.
—John Stewart, Editor, email@example.com.