
Behind the ACH’s Sizzling Growth - BallinBige
http://www.digitaltransactions.net/magazine_articles/behind-the-achs-sizzling-growth/
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djhworld
I was listening to a podcast a few weeks ago (Planet Money) and was genuinlely
shocked at how poor the US payments network is in relation to here in the UK.

Most bank transactions here complete within 2 hours (faster payments service)
and are completely free.

~~~
jwr
I could not believe my eyes when I saw that a transfer (it's called a "wire
transfer") will cost me $35 on the sending side, and the receiver will pay
another $25. Then you need the bizarre routing numbers which banks bizarrely
obfuscate for even more bizarre reasons and which are easy to get wrong
because there is no checksum. And then it takes days.

No wonder when anything even slightly better appears, people jump on it.

For comparison, a SEPA transfer in the EU costs around 1 EUR, gets done within
a single business day, and account numbers have checksums, so you can't easily
make a mistake.

~~~
digikata
A wire transfer is a little different than an ACH. Some transactions seem to
require wire transfer, not sure if that's just momentum or there is some other
driving reason for the choice.

[https://www.thebalance.com/ach-vs-wire-
transfer-3886077](https://www.thebalance.com/ach-vs-wire-transfer-3886077)

~~~
Qworg
Wires are required at times because they're "good funds" faster - ACH may take
up to 6 days to clear in bad cases.

Also, wires can't be reversed (generally). If that's a good or a bad thing is
dependent on the transaction and transactors.

~~~
wiredfool
ACH never really clears, it just hasn't returned yet.

Big banks will have the money next business day at the latest, Tiny
correspondent banks in alaska might be as far behind as an extra day or two.

There's a class of return that's supposed to come within 3 days, (NSF/No
Account/Closed Account) that's usually what the banks are waiting for, but
fraud related returns can be up to 60 calendars later by the rules.

~~~
Qworg
Ah, perfect - I had forgotten that banks had up to 60 days! Just nuts.

~~~
wiredfool
Yeah, but a CC chargeback has a similar time frame.

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dragonwriter
The article characterized healthcare as an anticipated future front, but US
insurers have been required to offer ACH payments since 2014.

[https://www.cms.gov/Regulations-and-
Guidance/Administrative-...](https://www.cms.gov/Regulations-and-
Guidance/Administrative-Simplification/Operating-
Rules/OperatingRulesEFTandRemittanceAdvice.html)

~~~
toomuchtodo
I would also expect with healthcare reform for healthcare related payments to
decline. Not to mention an aging population will see a decline in payment
activity.

With that said, it'd be swank to move as much paper checking activity to ACH
as possible for efficiency reasons, as well as credit card activity to ACH to
de-financialize payments (finance absorbs too much of GDP IMHO).

~~~
dragonwriter
> I would also expect with healthcare reform for healthcare related payments
> to decline.

In general, more people covered by public and/or private insurance means more
insurer to provider payments.

~~~
toomuchtodo
More total dollar amount, lower quantity of payments, no? As you're cutting
out all of the admin overhead, billing here and there, everywhere.

~~~
dragonwriter
> More total dollar amount, lower quantity of payments, no?

Well, I mean, that depends on the shape of reform. If you mean what the ACA
did, no.

Medicare for All? Maybe.

> As you're cutting out all of the admin overhead, billing here and there,
> everywhere.

A significant share, as I understand it, of that cross-billing is to get an
official denial from a higher-priority payer to show to another payer; my
intuition would be that more coverage and security of payments would, even in
a move to single payer, increase final number of payments unless actual
payments are grouped and consolidated rather than paid individually as
approved.

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rrggrr
According to my bank ACH's can be revoked without the account holder's
permission. Similarly, once the ACH link is set, funds can be withdrawn
without the account holder's knowledge. I'm glossing over the terms and
conditions account holders sign that enable this, because the essential point
is that opting into an ACH funds transfer relationship can have consequences.
We avoid ACH in our business for transactions of any real size.

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ac29
Does anyone know what Banks and/or services use same-day ACH? The article says
same-day volume was up to $160B last year, but I've yet to see anything faster
than next-day ACH.

~~~
thanatos_dem
ACH in the EU is generally same day. The US is super behind the times in that
regard.

The reason that it’s next day is that for most banks, the process of doing an
ACH transfer is to effectively SFTP a file with the amount to transfer and
account details to the receiving bank, and they batch process them nightly.

Also, with this system, there is no difference between a direct deposit and
direct withdrawal. One just has a negative transfer balance. So once you
approve someone such as your employer to direct deposit they can also withdraw
from your account with no warning.

It pains me that a system so shitty powers the world financial market...
that’s what you get from monopolies.

~~~
privateSFacct
False, the fraud filters on our account (ACH Positive Pay) pick up all direct
withdraws for approval handling (we can add rules with limits for recurring
withdrawals).

For folks with reasonable transaction volumes per year I highly recommend both
this, electronic payment systems and positive pay.

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amaccuish
Does ACH cost? I know in the UK we have faster payments, it usually shows up a
few seconds later in the target account, and it's free. I've mostly stopped
using paypal as a result.

~~~
jsmith45
ACH is not a service directly exposed to consumers. Instead it is the backend
for a lot of other services. It backs direct deposit, paying with "electronic
cheque", and most interbank-bank consumer transfers, broker-to-bank transfers,
and even many service-to-consumer transfers. For example, when you withdraw
money from paypal in the US, it would normally be via an ACH transfer to your
bank account.

ACH transfers are not same day by default, and definitely not near-instant.
However some of the consumer visible services offer immediate delivery, while
still using normal "slow" ACH in the backend. Typically this is done via
another network that verifies that the funds are available, and that the ACH
transaction has been submitted. If both are verified, the receiving
institution can be fairly confident they will get the money, and will make it
available immediately.

For more immediate and irrevocable transfers, wire transfers are used. The
Fedwire system for example, allows banks to directly transfer funds from their
Federal Reserve deposits to each other. The sending bank ensures that the
sender has the available money and debits it, while the receiver bank gets
notice from the federal reserve that the transfer is complete and credits the
receiver account. Obviously the banks can also use this system to directly
settle any debt that they owe to the other bank, since federal reserve
balances are legally equivalent to cash in the vault.

The US does not have any system quite like the UK's faster payments system. In
the US there is basically an unwritten rule that no consumer should ever
actually see the account number of a company or other consumer except when
printed on a physical paper check.

So the closest we've gotten to the faster payments system is the Zelle payment
network, which unlike Paypal or Venmo is a service offer directly by the bank,
but abstracts away account numbers by using phone number or email addresses.
Zelle does offer immediate settlement from the consumer's perspective. This
system is far from universally implemented right now, and still only works for
consumer to consumer payments.

For bank's billpay services, they end up using ACH if they have an agreement
with the biller, or otherwise create and mail a physical paper check!

Basically the US payments systems are still stuck back in the 1990s.

~~~
laurencerowe
Living in the US I miss the UK’s standing order system where you can instruct
your bank to periodically transfer funds without risk of a cheque getting
delayed or lost in the post (frequent occurrence with billpay.)

Used to take a few days until Faster Payments got implemented, free of charge
and dates from 1968 best I can tell.

The Zelle systems don’t seem to allow periodic payments and the maximum amount
is well below that needed to make a Bay Area rent payment.

~~~
toomuchtodo
Most landlords use cozy.co or some other rent payment management system that
should handle the electronic payment with ACH on the backend so you don't need
Zelle. If your landlord doesn't, ask them to. It's free for both of you.

~~~
laurencerowe
Of the three landlords I've had in SF none have used such a system.

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beaner
I wonder how much of this is practical use of ACH vs using it to enter and
exit other modern payment networks like venmo and coinbase, because ACH is
actually abysmal.

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exabrial
Server just got slashdotted. Anyone have a cached link?

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dontbenebby
Slashdotted? Now there's a phrase I haven't heard in a while :)

Wayback machine has it:

[https://web.archive.org/web/20190404230059/http://www.digita...](https://web.archive.org/web/20190404230059/http://www.digitaltransactions.net/magazine_articles/behind-
the-achs-sizzling-growth/)

~~~
exabrial
Hah what's the new word? Redditased? Hackeromped? Techcrunched?

------
le-mark
If anyone's interested in beta testing an app for easily viewing/editing fixed
length files (ACH format files) shoot me an email.

~~~
imglorp
I seem to remember reading somewhere the transport channel used to be nightly
FTP of these files in a cron job. Is that still true, and if so, how do they
manage to secure something like that?

~~~
whyaduck
SFTP - I can't say what's happening today, but 8 years ago this was the only
channel available when I added an ACH payment system to B2B accounting system.
80 column text files SFTP'd overnight to the company's bank. I also had a
couple of 200 page dead tree books on my desk describing the process &
formats.

I joked that it was originally designed for delivery by telegraph. I'm still
not convinced I was wrong.

~~~
wiredfool
80? The file format is 94 char fixed width, and it's based on the track specs
of 9 track mainframe tape.

~~~
whyaduck
It was a 3 month project I finished 8 years ago...I guess my memory failed me.

~~~
wiredfool
Sorry, I was just switching away from the first low level NACHA file stuff
I've had to do in years.

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franciscojgo
Pretty sure physical check use decline can be directly correlated to ACH use
growth.

