Accept ACH Payments and Transfers Instantly

August 31, 2021

Accept ACH Payments and Transfers Instantly

ACH payments are processed in batches and typically take 1-3 business days to process. Same-day ACH payments do not provide instant or same-day funds. 

Automated Clearing House (ACH) is an interbank payment option for the transfer of money between banks, through a financial network. It is an electronic network that facilitates financial transactions (electronic funds transfer) among financial institutions in the electronic payment processing industry. 

This type of payment method processes numerous transactions, credit, and debit transactions, in batches, using advanced verification tools. Such flexible payment options and transactions include direct deposit and payroll payments. Businesses can also accept custom payments (ACH payments) instantly from their customers instead of checks, mobile money payments, and wire transfers payments processors. 

If your business relies on repeat payments, such as a monthly service plan, a subscription, or a club membership, you know how time-consuming and costly it can be to invoice and wait for payments from the same people every month. One easy solution is to accept ACH payments, which enhances automatic digital payments. These payments can be automatically deducted from your customer's checking account, saving you both time and money. 

Do ACH payments post immediately? 

The length of time for an ACH transfer to be completed will depend on several factors. First, each financial institution will normally do the customer authentication processes and process ACH electronic payments in batches. Therefore, if your bank submits only one batch of entries at the end of the day, then your ACH transfer is delayed already by one day.  

ACH payments are not an instant payment method. Payments may take about 1-3 working days to clear your bank account. For instance, take a brief look at the typical timeline of processing an ACH payment: 

Day 0 

  • ACH file submitted to your bank 
  • Bank processes file and send to the ACH network 

Day 1 

  • The file is available to your customer’s bank 
  • The customer’s bank receives the file and debits their account 
  • Funds credited to ODFI 

Day 2 

  • Customer’s bank notifies ACH network of any failures 

Day 3 

  • Your bank receives notification from ACH network and communicates with you 

 The time of day you decide to submit the ACH file to your bank is important, as ACH debits payments, for instance, only get processed three times throughout the business day. Different banks may have a different cut-off time for receiving ACH files in real time - if you submit after the cut-off time, your request is likely to remain in a holding period, not likely to be processed until the next day. Check with your bank for their specific cutoff times. 

There are varied reasons for payment failures, some of which include: 

  • The ACH file is submitted in an incorrect format 
  • The customer has insufficient funds in their account 
  • The customer’s payment details are incorrect 

Can ACH transfers be instant? Same Day ACH Transactions 

Because of the popularity and demand of ACH transfers, Nacha introduced same day ACH transactions. By expediting processing, ACH transfers could more effectively compete with the fast-processing timelines of a wire transfer. 

This allows banks to make more than one ACH request per day (up to two, in batches) and it expedites the time between a user submitting an ACH request and the processing time of the financial institution. 

Here is an overview of same day ACH transactions: 

In 2016, Nacha rolled out the same day ACH processing. This not only improved the quality of the ACH Network but also reduced the incidence of returned entries and the associated financial costs of the ACH Network. 

Same day ACH transactions open processing times so entries submitted using same day entries will entitle the recipient to receive those funds that day.  

ODFIs (Originating Depository Financial Institutions) will be able to submit same day ACH payments through two clearing windows: 

  • 10:30 AM ET, with settlement occurring at 1 PM 
  • 2:45 PM ET, with settlement occurring at 5 PM 

RDFIs (Receiving Depository Financial Institutions) are required to receive same day ACH payments and they will be mandated to make funds available from the same day ACH credits to the depositors by 5 PM at RDFI’s local time.  

Virtually all ACH transactions (99% of the current ACH volume), including both ACH credits and ACH debits, are eligible for this type of processing. International transactions (IATs) and transactions above $25,000 are not eligible. 

Reasons an ACH Transfer is Not an Instant Transfer of Funds 

ACH payments do not immediately land in the recipient’s account, like some instant bank account transfers. This concept may seem odd for us since we are used to operating on expedited timelines of automatic payments. However, waiting for an ACH transaction to be processed is the smart thing to do. 

One of the best ways to understand why an ACH transfer takes time is to look at return codes. Return codes are a set of three-character codes that inform the financial institution who requested the ACH payment (the Originating Depository Financial Institution or ODFI) of the reason for why an ACH transaction failed. A return custom code might pull up that a bank account is no longer active, or that the funds that they attempted to pull were insufficient.  

Not all these common reject codes are instantaneous as, according to Nacha’s operating rules, RDFIs have 48 hours (about 2 days) to submit a return code. This is largely because of the high volume of ACH transfers that a financial institution might experience in a single day. Banks need the time to verify the individual details associated with each transaction.  

Add all this up to the fact that the ACH network operates along with business day timelines, and it becomes clearer as to why these transactions can take time. 

How do I accept an ACH payment? 

ACH payment processing usually involves five steps. The most common example is a direct deposit.  

Here is how it works: 

  1. An employee authorizes a company to deposit their salary, bonuses, and any other income into a designed bank account. The employee provides a bank account number, routing number, and institution number. 
  1. The company enters the bank account information into its banking or paying system. In this scenario, the company is known as the Originator as they are where the money is coming (or originating) from. 
  1. The company will submit a request with their bank to submit an ACH credit. The bank in this scenario is known as the Originating Depository Financial Institution (ODFI). The ODFI receives the payment files and makes electronic ACH entries for all the ACH entries that they received that day. 
  1. These entries are sent to the ACH Operator, who then sorts through the entries to verify the corresponding financial information. 
  1. The request is then submitted to the Receiving Depository Financial Institutions (RDFI), who has 48 hours to look for any reason for why this ACH transaction will not work.  
  1. Once the processing has been completed, and it usually takes about 3-4 business days, overall, the employee will receive the money that they are owed. In this scenario, the employee is known as the Receiver.  

Finally, although ACH payments are not necessarily done instantly, they still are a quick way to get paid. 

Let us show you what we can do. Contact us to find out more. 

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