Data: Same-day ACH volume vs. fraud

Same-day ACH payments—introduced for credits in 2016 and debits last year—are gaining popularity with banks and corporations. The success prompted Nacha this week to approve new rules for these payments going into effect over the next two years. Speed and access for same-day funds will expand, and per-transaction limits will rise from $25,000 to $100,000.

But many corporations say that’s still not large enough to be very useful.

More than half of U.S. financial institutions have made same-day ACH funds available without seeing any major shifts in fraud, according to Nacha. But some observers warn that as same-day ACH introduces broader access and bigger transactions, it will become a bigger temptation for fraudsters. They urge organizations to improve their account security before the next changes go into effect. Here are some numbers and compliance dates worth noting.

Chart: Same-day ACH surges
Same-day ACH credits launched a year ago, on Sept. 15, 2017 and quickly gained popularity, according to Nacha. There were nearly 41 million same-day ACH transactions in the quarter ended June 30, 2018, an increase of 243 percent over the same quarter a year earlier, Nacha reported this week.

Businesses, financial institutions and consumers are making use of same-day ACH debit and credit transactions, although volumes are still tiny compared to mainstream ACH credit and debit transactions, which totaled 5.7 billion during the second quarter of this year, according to Nacha.

Mainstream ACH credit transactions totaled 3.3 billion, and ACH debit transactions reached 2.4 billion during the quarter ended June 30.
Chart: Top priority
Across the board, last-minute bill payments and emergency payroll transactions are the top use cases for organizations, according to a survey the Association for Financial Professionals (AFP) conducted among its members when same-day ACH was making its debut. Routine payments to suppliers and trading partners also are likely to travel by same-day ACH to maximize efficiency, respondents indicated.

But the newest Nacha rule expanding per-transaction limits will make the biggest immediate difference to corporate treasurers, according to the Association for Financial Professionals.

“Nacha is addressing one of the main pain paints in same-day ACH—the low dollar value,” said Magnus Carlsson, AFP’s manager of treasury and payments, in a press release this week. Increasing the limit for same-day ACH will facilitate a wider range of use cases, according to Carlsson.

Corporations report using same-day ACH to pay federal taxes and mortgages, and $25,000 is too small to be practical for many of these types of payments, according to the AFP. But Nacha’s higher same-day ACH limit still may not be enough for many users. “Even though $100,000 is a great increase, there is definitely room for expanding the limit further in order to make same-day ACH attractive for corporate end users,” Carlsson said.
Chart: What banks think
Large banks participating in same-day ACH transactions expect volume to continue to grow in the next year, according to a survey NACHA conducted late last year. Among 22 U.S. financial institutions representing 78 percent of ACH network-originated transactions, the majority forecast rising same-day ACH volumes over the next several months.

More than half of banks said middle-market corporations are likely to be most interested in same-day ACH credit and debit transactions.
Chart: Balancing act
Same-day ACH debit payments went into operation in September 2017, a year after same-day ACH credits went live. NACHA expected the faster approach to debit payments would be appealing for bill payment and for providing consumers more up-to-date information on account balances.

Banks participating in NACHA’s survey shortly after same-day ACH debit rolled out anticipated that volume would grow somewhat faster. They were right; same-day debit volume is already nearly equal to credit volume through the second quarter of 2018, indicating fast adoption and acceleration of usage.
Chart: New rules
Same-day ACH is not generating reports of fraud. But the new payment format’s volume is still infinitesimal compared with mainstream electronic payments, and therefore it’s unlikely to be on fraudsters’ radar yet.

Mainstream ACH debit and credit transactions totaled more than 5.7 billion during the second quarter, compared to 41 million same-day ACH credit and debit payments, according to Nacha’s latest reports.

With the brisk growth rate of same-day credit and debit ACH, these quicker approaches will soon begin to gain enough critical mass to attract more interest from fraudsters, some fraud-prevention professionals predict. “Fraud is an opportunity game, and the more volume and mainstream a product gets, the more likely it is for fraud to appear,” said David Barnhardt, executive vice president of product at Giact Systems, which creates identity-verification tools to fight fraud .

Same-day ACH debits create new opportunities for fraudsters to use the shortened settlement windows to bypass existing fraud-prevention tools, Barnhardt said. He recommends that organizations planning to offer same-day ACH debits update their systems and processes to validate both account status and ownership in real time, particularly as volume and transaction sizes increase.