In 2023, the ACH Network added more than a billion and a half new payments, a year-over-year growth rate of 4.8%. With the economy doing reasonably well, employment levels being high, and payments continuing to migrate away from paper checks and cash, ACH is not just growing robustly but also poised to continue that growth well into the future.
We asked Mike Herd, Executive Vice President of ACH Network Administration at Nacha, about what’s fueling that growth and where he expects ACH to be headed. Herd discussed these issues with Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, in a recent PaymentsJournal podcast.
ACH by the Numbers
The ACH Network handled 31.5 billion payments last year and moved more than $80 trillion. Of that growth, Same Day ACH volume increased by more than 22% in 2023. Notable drivers of overall ACH expansion included:
- The number of consumer internet-initiated payments rose by 5.7% to 9.9 billion, primarily supporting bill payment and account transfer use cases.
- The number of healthcare claim payments to medical and dental providers rose by 7.7% to 488 million.
- Direct Deposit volume increased by 3.3%, with 8.3 billion payments to workers.
The dollar limit of a Same Day ACH payment increased in 2022 to $1 million, which has had an effect in the marketplace. “We have been seeing results from it continue through the present with increases in transactions and increases in dollar flows,” Herd said. “Since Same Day ACH started in 2016, we’ve now surpassed 3 billion payments, moving more than $6 trillion. Among the leaders in that growth are things like business-to-business payments and consumer-initiated debt—transferring funds, paying bills [and] loading wallets.”
Herd said that the increase in Same Day ACH usage has been largely through payroll and other types of disbursements to workers and consumers. That might be a missed payroll, or paying shift or gig workers, for whom speed of payment is an important consideration. Or it might be something like an insurance payout, another instance where speed is an important factor.
The pandemic was another factor that led to more ACH payments. “During the COVID era, we saw a pretty dramatic shift, impacting businesses that didn’t have staff present in person to issue or process checks,” Herd said. “That was a catalyzing event from a behavioral perspective, for businesses to not process checks at all, and to move to ACH in particular rather than other electronic payments.”
The Growth in B2B Payments
Business-to-business payments have been one of the true success stories for the ACH Network. Over the past decade, there has been a documented decline in the use of checks for B2B payments. Nacha’s data shows where the action has moved, with ACH use for B2B payments growing by double digits over the past seven or eight years.
In 2023, the growth was by almost 11% to 6.6 billion B2B payments, primarily oriented around B2B vendor payments. In the Same Day B2B payments, volume grew by more than 50% in 2023, up to 261 million B2B payments made. From a dollar perspective, that’s growth of nearly 60%, with about $1.4 trillion moved via same-day transfers.
“From the Javelin side, we have survey data that shows, for example, that small businesses often face challenges with cash flow, and they think faster payments would help improve their cash flow,” Tavilla said.
Herd added to “keep in mind that better cash flow for one side of the payment might mean worse cash flow for the other side of the payment. A payer that holds on to money longer to accumulate more interest is going to pay at the last minute, and that will have an impact on the receipt side.”
Looking to the Future
What’s certain is that ACH will continue to evolve to meet users’ needs. “I like the analogy of how everyone used to have a landline,” Tavilla said. “Then we had the giant cellphones, then flip phones, and now we all have smartphones. It’s similar with payments. With the technology and the evolution and the different iterations of the products, I imagine the trend will be toward faster, greater efficiency and more precision and control for all who are making payments.”
Nacha has several priorities on tap. It is looking to define additional expansions for Same Day ACH, including to encompass the full business day in the Pacific time zone. Most of the systems operate from an Eastern time zone perspective, and the current processing day closes in midafternoon Pacific time.
Nacha will also propose changes and enhancements to the International ACH transaction to try to improve understanding and adoption. It is evaluating expanding its Account Validation services offered through Nacha’s Phixius and for the Payment Information Exchange Network. Finally, it is looking roll out new rules around ACH Network risk management, particularly around fraud monitoring and reporting, to try to raise the bar on monitoring the ACH Network for anomalies and fraudulent transactions.
