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ACH Improvements, FedNow Represent Future of Electronic Payments

March 23, 2022, 8:29 PM

The volume and value of ACH payments has consistently increased for several years while the Federal Reserve prepares its FedNow instant payment platform, a Federal Reserve official and Nacha representative said March 22.

In 2021, the ACH network handled 29.1 billion transactions totaling $72.6 trillion, a “fairly significant jump” from 2020, said William Sullivan, senior director and group manager of government and industry relations at Nacha.

The volume of transactions has increased by more than 1 billion for seven consecutive years, and the total transaction value has increased by more than $1 trillion for nine consecutive years, Sullivan said.

Same-day ACH transactions rose by 74% in 2021, but only account for a small number of overall transactions, or 603.8 million in 2021, Sullivan said.

The same-day transaction limit additionally increased to $1 million per transaction March 18, Sullivan said at the American Payroll Association’s Capital Summit.

However, same-day transactions cannot be extended to weekends because the ACH network depends on the Federal Reserve banks’ National Settlement System, which operates on weekdays, Sullivan said.

The Covid-19 pandemic led to increases in business-to-business ACH payments and direct deposit of employees’ wages because “people weren’t going and writing checks, people weren’t cosigning checks,” and mailing or picking up paychecks in person was riskier because of the pandemic, Sullivan said.

Many states also paid unemployment benefits by check and switched to ACH payments during the pandemic, Sullivan said.

Large Covid-19 payment programs run by the IRS, such as for child tax credit advances and stimulus payments, were a new challenge for the agency but only represent a “drop in the bucket” of total ACH transactions, though the federal government is the largest user of the ACH network, Sullivan said.

A total of 31.2 million, or 87%, of child tax credit advance payments were made by direct deposit, Sullivan said.

About 60% of employees said that their employer’s practices around direct deposits influenced them to set up direct deposits, Sullivan said. In Wisconsin, a program called Wisconsin Saves was set up by the Consumer Federation of America to encourage small- and medium-sized employers to remind employees to set up direct deposits and split deposits, Sullivan said.

About 82% of U.S. employees use direct deposit, Sullivan said. The ACH systems allows employees to split their deposits into more than one account, such as checking and savings accounts, but only 34% of employees who use direct deposit split their deposits, he said.

FedNow System

A Federal Reserve survey of businesses found that 90% of respondents planned to initiate or receive faster payments by 2023, and “many are already doing so today,” Tim Boike, vice president of industry relations at the Federal Reserve Bank of Chicago, said.

The Covid-19 pandemic also accelerated businesses’ plans for adoption of instant payments as consumers demand more payment options, whether virtual or not, Boike said.

The Federal Reserve is working toward the introduction of its FedNow instant payment platform, which is to be designed for all kinds of transactions between businesses, individuals, and governments, Boike said. It is planned only to support credit, not debit, transactions, he said.

Resources for FedNow’s introduction include a website, FedNow Explorer, which provides information about instant payments, FedNow features, use cases, and FedNow’s implementation, Boike said. The site also allows service providers and financial institutions to connect with each other, he said.

A public interest group known as the FedNow Community has about 2,000 members from 1,000 organizations and provides feedback on FedNow, especially on design and functionality, to the Federal Reserve through working groups, surveys, and individual conversations, Boike said.

The FedNow Service Readiness Guide also helps businesses prepare for implementation, and information from feedback sessions and testing is included in the guide, Boike said. “It’s literally considered the Bible of the FedNow service,” Boike said.

To contact the reporter on this story: Jamie Rathjen in Washington at
To contact the editor on this story: William Dunn at