In the first half of 2023, the ACH Network saw consistent transaction volume growth, handling 7.7 billion payments valued at $19.7 trillion in Q1—a 6.4% increase over a year prior, and a processing 7.8 billion payments transferring $20 trillion in Q2—a 4.3% and 2.9% increase respectively. The steady rise underscores the ACH Network’s indispensable role in various financial operations, including payroll, tax refunds and business-to-business payments.
In a recent PaymentsJournal podcast, Michael Herd, Senior Vice President of ACH Network Administration at Nacha, and Elisa Tavilla, Head of Debit at Javelin Strategy & Research, discuss the current state of ACH, offering insights into its trajectory and impact.
ACH is a Booming Market
In March 2022, the dollar limit for Same Day ACH payments increased to $1 million from $100,000. This change led to a noticeable rise in the use of Same Day ACH for higher-value payments.
“The value of Same Day ACH payments for the first half of 2023 reached almost $1.2 trillion, which is more than 50% higher than the previous year,” Held said.
The higher transaction limit has influenced various areas, including payroll and consumer disbursements. Insurance companies, for example, have found it beneficial for making larger insurance payouts, including homeowner claims.
The new limit has also been advantageous for businesses making vendor payments and inter-business transfers. Such transactions often involve larger sums, and the increased limit has allowed for wider adoption of Same Day ACH.
“People are also showing a lot of interest and enthusiasm for faster payment options, including both Same Day ACH and other rapid payment systems,” Tavilla said. “There are numerous areas where these faster payments are valuable, like healthcare, payroll and real estate. It’s clear that the increased transaction limit has opened up more opportunities for businesses to make the most of these faster payment methods.”
And the demand for faster payments is set to continue to grow.
“Various payment systems will likely experience simultaneous growth, especially as transactions move away from checks,” Herd said. “It’s a reasonable forecast considering how many businesses are already accustomed to using ACH. While they become acquainted with alternatives like FedNow and RTP, they will likely begin by utilizing ACH, a method they are familiar and comfortable with.”
ACH in the Healthcare Sector
Healthcare organizations are increasingly leveraging ACH—and this adoption is driven by the need for efficiency and convenience in processing medical bills, insurance claims and reimbursements.
“People are adopting digital methods to split bills, share expenses and transfer funds among friends and family,” Herd said. “The ease of ACH transfers is contributing to this trend, making it more convenient for individuals to manage their finances seamlessly.”
Unlike retail, where payments happen at the point of sale, healthcare payments often occur after care is given. Although electronic bill payments have been common for decades, medical practices still use paper for these transactions. But the pandemic accelerated the shift to digital, with more insurance providers encouraging electronic form submissions and reimbursing providers through digital payments. But that shift is not complete throughout the industry.
“Healthcare organizations have documented the potential savings in administrative processes by transitioning from paper-based transactions to electronic methods,” Herd said. “In 2023, there remains a significant opportunity to embrace electronic submissions and payments in the healthcare industry.”
A similar shift is also occurring in the business-to-business (B2B) sector. “Efforts over the years have led to making electronic B2B payments more convenient and user-friendly than checks,” Herd said. “The need to adapt during the pandemic pushed businesses to use ACH for B2B transactions instead of checks.”
Even though some employees are returning to their workplaces, the shift back to checks hasn’t happened. Once a switch to ACH is made, it tends to stick.
These trends suggest that payment systems such as ACH will shape the landscape of payments in the coming years.
Check Fraud: A Reason to Move to ACH
Although the use of checks is diminishing, it remains active. And those still using checks should reconsider, Herd stresses, particularly because of fraud.
“When it comes to the ongoing issue of check fraud, my advice is quite straightforward: Stop using checks,” Herd said. “The irony lies in the fact that while check usage has decreased, check fraud has remained a persistent problem. Financial institution filings about check fraud have doubled in a year, and checks are the payment method most impacted by fraud.”
To reduce vulnerability to fraud and unauthorized payments, it’s best to look at electronic payment methods, such as recurring electronic debits, which offer greater security and efficiency.
“From a consumer’s standpoint, I’ve noticed news stories about thieves stealing checks from mailboxes,” Tavilla said. “It’s a bit like the scenarios portrayed in ‘Catch Me If You Can,’ which we might assume were things of the past. But check fraud remains an issue.”
For financial institutions dealing with check fraud, Nacha offers a helpful tool called the ACH Contact Registry, which provides contact information for the personnel responsible for check payments at various financial institutions. This resource helps resolve check fraud cases effectively.
The ACH network is steering the course of financial transactions toward greater efficiency and security. The growth in transaction volume during the first half of 2023 cements the ACH Network’s pivotal role in powering a multitude of financial operations. The industry’s embrace of electronic methods, guided by ACH’s stability and security, continues to transform the payments industry, particularly in the healthcare sector and with B2B transactions.