Outside of handing somebody cash directly, all payments require some processing time before they are in the hands of the vendor.
This often puts businesses in a tricky position. With due dates approaching, they need certainty that the money is going to get through in time and keep their vendors happy.
But some payment platforms are working towards truly instant payments that take money directly from one bank account and deposit it in another, all while leveraging an established bank network that’s been used since the 1960s. That emerging payment method is instant ACH transfers, and here’s what you need to know about them.
What is an instant ACH transfer?
An instant ACH transfer is a way of sending money from one financial institution to another as quickly as possible. It uses the ACH network, a trusted and secure network connecting banks throughout the United States that facilitates electronic money transfers.
Every day, transfer information is submitted to the ACH network (Automated Clearing House network). At intervals throughout the day, the money is tallied and transferred for the banks to deposit directly into the recipient’s bank account.
An ACH transfer can be an ACH credit or an ACH debit. An ACH debit is initiated by the payee receiving the funds, while an ACH credit is initiated by the one sending the funds.
Typically, ACH transfers take 1-3 business days to clear, however some banks offer a same-day option. As of today, instant ACH transfers are only offered by third-party providers like PayPal, Venmo, or BILL.
How does an instant ACH transfer work?
The ACH transfer process works differently when making an instant ACH transfer with a third-party provider.
Instead of the funds being pulled from one bank account and routed through the ACH network to the recipient, the third-party fronts the money to be deposited immediately. They then submit the ACH debit request to pull money from the original payer’s bank account.
This means the actual ACH transfer is happening after the payment is completed.
The receiver is compensated immediately, but the ACH transfer to the third-party is completed over the usual timeline.
How long do instant ACH transfers take?
An instant ACH transfer typically has the funds deposited in the recipient’s bank account in minutes.
There may be a delay in processing the instant ACH transfer if there are errors in the payment information or insufficient funds in the account.
Before hitting send on an instant ACH transfer, review all of the payment details and check that the account the funds will be pulled from can sufficiently cover the transfer.
Benefits of instant ACH transfers
Instant ACH transfers improve the experience for both the sender and the receiver. Here are some of the benefits both parties experience.
Improved cash flow management
With traditional ACH payments (or ACH checks), funds are held for days before finally reaching their destination meaning payments need to be planned for and sent in advance of the due date.
By using instant ACH transfers, funds are sent instantly meaning a payment can be initiated and completed at the convenience of the sender. That’s multiple days of accessing funds that would otherwise be left in limbo.
Cost savings
The fees on instant ACH transfers vary by provider and may be either a flat rate or a percentage of the sent amount. Typically, the fees will be lower than wire transfers which can cost upwards of $50 domestically.
Compared to traditional paper checks, the monetary cost may be higher, but the time savings are just as invaluable and free up finance teams to focus on more valuable work.
Vendor satisfaction
A paid vendor is a happy vendor and with instant ACH transfers, your vendors are paid within minutes of an initiated payment. This cuts out any chances of a payment showing up late because it was stuck in processing purgatory.
How to set up instant ACH transfers
If you want to send or receive instant ACH transfers, you’ll need to get set up with a third-party provider since banks do not offer instant ACH directly.
Once you’ve chosen a third-party payment provider, you’ll be prompted to connect a bank account and verify the banking information. After the provider has verified the account, you’re ready to start sending instant ACH transfers.
Set up each of the vendors you’ll be paying within the account. Notify them that you’ll be using a new payment platform and to reach out if there are any issues with them receiving the funds.
It’s worthwhile to send a test payment to confirm everything is set up correctly and that the processing times are as instant as advertised.
Using instant ACH to get paid faster
Even if a customer is paying an invoice on time, it could take days to reach the bank account, especially if it comes through after hours or before a weekend. So how do you control cash flow when you’re waiting on the system?
With instant transfer from BILL give you control over your cash flow by expediting deposits directly into your bank account, even on weekends and holidays. Payments are typically deposited within minutes at 1% of the total deposit amount.
Reach out to schedule a demo and see how BILL can help you take control of your cash flow and streamline your accounts receivable processes.
Frequently asked questions
Are ACH funds available immediately?
No, ACH funds are not available immediately. A traditional ACH transfer takes 1-3 business days to process. However, an instant ACH transfer deposits funds in the recipient’s bank account within minutes.
How can I transfer money instantly with routing and account number?
Transferring money instantly can only be done using a payment platform that supports instant ACH transfers. Most payment platforms require the recipient’s routing and account number to confirm where the money is being sent and complete the transfer.
Are there any same-day ACH transfers?
Yes, some banks offer same-day ACH transfers. These types of ACH transfers are deposited on the day the payment was initiated but may take a couple of hours to deposit as they are still dependent on the transfer intervals of the ACH network.
To guarantee an ACH transfer goes through as quickly as possible, it’s best to rely on instant ACH transfers.
Are there fees for instant ACH transfers?
Instant ACH transfers typically have fees that could be a flat rate, percentage of the transaction, or a combination of the two. For example, PayPal charges a fee of 1.75% of the transfer amount on instant transfers.
Do instant ACH transfers have amount limits?
ACH transfers limit how much can be sent on an individual transfer, as well as the amount of transfers and the cumulative amount of currency in a given period.
Third-party payment processors that provide instant ACH transfers often don’t have the same limitations. Check with your provider for more details.
Are instant ACH transfers secure?
ACH transfers use a well-established bank network called the Automated Clearing House network. Any payments submitted to the ACH network is thoroughly reviewed before completion.
However, there are still risks of fraudulent activity from scammers who try to elicit payments from senders through lies and deceit. You should always review the payment details and who is requesting a payment before submitting anything.
