In 2023, Same Day ACH payments experienced significant growth in volume and value, reaching an impressive 853.4 million payments worth $2.4 trillion, representing over 40% growth in value from 2022.
Yet despite its popularity, Same Day ACH transfers are still lagging behind other currently available payment methods. In fact, many consumers and businesses don’t utilize Same Day ACH for their transactions or even know that it exists.
Let’s take a deeper look at Same Day ACH, how it works, specific uses cases, and what you need to know before switching over.
What is Same Day ACH?
Introduced in 2016, Same Day ACH is a U.S. payment processing system that facilities same-day settlement of electronic transactions, a departure from the traditional one to two business day period. This expedited processing is advantageous for time-sensitive payments, payroll, and other financial transactions, offering quicker and more efficient fund transfer between accounts.
The 2018 introduction of faster funds availability was a collaborative effort by financial institutions, NACHA, and industry experts, aligned with the broader Federal Reserve's Faster Payments Task Force initiative to expedite and modernize U.S. payment systems.
How do Same Day ACH transactions relate to other ACH payments?
As suggested by its name, Same Day ACH is not a fully separate payment service, but an extension of the larger Automated Clearing House (ACH) network.
Since the initial launch of ACH, there has been a growing demand for faster payments, especially with the increased ubiquity of online transactions for both businesses and consumers. Previously, the only option for ACH transactions took between 3 and 5 business days to complete, lagging behind consumer expectations and not accommodating for evolving use cases.
The ACH network as a whole has had a variety of improvements and now these payments have two speed options:
- Same Day ACH
- Next Day ACH
Same Day ACH is the fastest of those options, allowing businesses and consumers to send money and have that payment processed and settled within the same working day.
However, all payments are processed essentially the same way.
A financial institution sends instructions to another bank about moving a specific amount of money. All instructions have to follow the standards set forward by ACH’s governing organization, Nacha. Then the instructions go to the Federal Reserve, to settle such instructions by moving funds between master accounts of the financial institutions.
How do Same Day ACH transfers work?
Even though Same Day ACH offers faster money movement, transfers are not instantaneous.
All ACH payments are cleared and settled in batches and have been since the initial introduction of the ACH network. The speed improvement comes from the introduction of additional settlement windows during each working day.
With new settlement windows, transactions are processed more frequently and faster. These additional times benefit all ACH payments, but Same Day ACH transactions are processed even faster as they are prioritized within that working day and the next available settlement window.
Same Day ACH service fees
Same Day ACH service fees are much lower when compared to wire transfers or card payments.
On top of the normal ACH fees, which you can read about in our general ACH payment guide, there is an additional “Same Day Entry Fee” which can be up to $.10 – $.15 more than standard ACH.
As such, Same Day ACH payments are a bit more expensive than slower ACH transactions. But even with that additional fee, Same Day ACH is still significantly cheaper than many other available payment methods.
Same Day ACH processing windows
There are currently 3 settlement windows per business day depending on when or how exactly a transaction is posted. Those settlement windows are:
- 1:00 pm EST
- 5:00 pm EST
- 6:00 pm EST.
Same Day ACH limits
Same Day ACH can only be used with certain types of transactions depending on their type and the amount sent.
Same Day ACH works with both ACH Credit and ACH Debit transactions. You can find more information on these two types of payments and how they are used in the ACH guide. However, only domestic transactions are eligible for same day processing.
Since March 2022, Same Day ACH is only available for transactions under $1,000,000 in value (up from the original $25,000 limit). Any payments larger than $1,000,000 are processed as Next Day ACH instead.
What is the impact of Same Day ACH payments?
Even with the original $25,000 limit per transaction, around 99% of the ACH network volume was made up of payments eligible for Same Day ACH processing.
Despite that wide-reaching eligibility, one important limitation is that Same Day ACH transfers are not instant and not even necessarily same day. Certain payments are not eligible at all and other eligible payments cannot be processed within the same day depending on when they were sent. The ACH network functions only on business days, so a transaction may not be processed immediately if it’s sent:
- After the last settlement window of that day
- On a weekend
- During a national or banking holiday.
However, the introduction of additional settlement windows during business days does significantly improve the speed of processing for all ACH transactions, and Same Day ACH payments can be settled nearly in real-time when sent during working hours.
Top 10 Use Cases for Same Day ACH Processing
Nacha states that their research found 63 different use cases for Same Day ACH.
However, the 10 primary use cases that they explain are as follows:
- Payroll
- Urgent claims payments and refunds
- Invoice and tax payments
- Person-to-Person (P2P) transfers
- Account-to-Account (A2A) transfers
- Bill payments
- Online purchases of goods and services
- Point-of-Sale (POS) check conversions
- Collection payments
- Merchant debit payments
3 Benefits of Same Day ACH transfers?
Same Day ACH transfers maintain most of the benefits associated with the larger ACH network. These benefits are:
- Ubiquitous and supported by all financial institutions in the US
- Cheaper than wire transfers or card payments
- Secure
While Same Day ACH transfers are not real-time as are RTP payments network or the FedNow service, Same Day ACH still provides businesses and consumers with most of the practical benefits of real-time transfers.
Speed provides organizations and individuals with flexibility. Same Day ACH can be used for urgent payments to cover bills or avoid late payment penalties, to control cash flow, and/or to cover outstanding obligations faster.
Ultimately, Same Day ACH combines the ability to send money quickly while still saving a lot of money on processing fees.
Experience faster money movement with Orum.io
At Orum, we're here to help with money movement via Same Day ACH, or any payment rail, without the hassle and risks you may face by initiating those transfers yourself. We an determine the best possible transaction speed, picking between same-day, next-day and 2-day ACH.
If you're ready to implement efficient Same Day ACH transfers into your product or solution, get in touch!