Automated Clearing House (ACH) transfers have been around since the early 1970s in the United States, but the electronic money transfer system has received a lot of attention recently. By attention, we mean the $72.6+ trillion in transactions that the system recorded in 2021. So, what has made a bank-to-bank money transfer system, which has been around for more than 50 years, so lucrative for businesses recently?

What Actually Changed?

The earliest ACH systems cannot possibly be compared to the latest digital technology by any means, so incremental changes that took place over the five decades improved and optimized the ACH payment system to a vastly superior medium for fund transfer. However, not much has changed about the core technology powering automated clearing house transfers in the last five years at least. Yet, the electronic bank-to-bank money transfer system started to see user activity at a higher rate than ever before in the last two years.

This was a direct result of approved, third-party API integration support. While Nacha itself is continuously working to improve the core system and set the guidelines for all its partners, they have recently partnered up with world-class financial software solution providers. Consequently, this has allowed the end-users (mostly large, medium, and small businesses) to optimize the ACH fund transfer platform for cheaper, faster, and less risky transactions. Let’s look at how they are managing to do that.

Reliable, Real-Time Bank Verification Process

Susceptibility to fraudulent activities was one of the biggest disadvantages of ACH payments, which had previously kept the medium from gaining as much traction as it has gained recently. Fortunately, bank verification no longer needs to be a major concern for businesses accepting ACH payments anymore. Take a look at this bank verification solution (API/software application) from Yodlee which verifies bank accounts in real-time. No microtransaction, routing number, or account number is needed in advance for the system to instantly verify and validate a bank account against fraudulent activities and incorrect information.

Same-Day Transfers

Wire transfers lose significant ground against ACH transfers because unlike the former, the latter can facilitate same-day transfers. The typical wire transfer takes less than 3 – 4 days to show up in the recipient’s bank account, but that too is only possible if both parties are holding US accounts. International wire transfers can take much longer. Same-day transfers are possible with ACH expedited payments though, even in the case of international transactions. The speed of funds transfer is often critical in business transactions, which puts ACH payment solutions at a significant advantage against regular wire transfers. Note that there are certain, potential risks associated with expedited automated clearing house fund transfers, but that’s once again where the third-party partners of Nacha come in. Industry-leading standards for bank verification, validation, transaction security, and financial privacy mitigate any chance of a fraudulent transaction going through undetected. Speed and efficiency are not achieved at the cost of sacrificing security at any point with ACH transactions.