Will Higher Instant Payment Limits Take B2B Share from ACH?

For all transactions — but especially for high-value commercial payments — speed is always a consideration, alongside the costs of those transactions, as well as security concerns.

With new, higher limits on real-time payments, the choice to move away from batch processes to settlement in seconds begs the question as to what will happen to ACH payments. Specifically, there may be some cannibalization on the horizon. Payments are fast becoming a 24/7/365 proposition, rather than facing the limits of banking hours.

To get a sense of how entrenched traditional payment methods have been in B2B, roughly 40% of commercial transactions are tied to checks.

As for ACH payments, the market’s a significant one to be chipped away at by real-time payments, even as same-day ACH gains traction. As noted here, ACH payments are estimated to make up roughly 48% of B2B transactions. And elsewhere, as PYMNTS has reported, Nacha said in October that same-day ACH volume on the ACH network leapt 65.7% in the third quarter compared to a year earlier, while the value of those payments rose 38.8% to about $744 billion.

Additional detail from Nacha indicates that as measured in all of 2023, same-day B2B payments came in at $1.4 trillion, a 59% boost over 2022 levels.

The Clearing House reported in March that transaction volume on EPN, its ACH network from The Clearing House, grew 8% in 2023. Overall 2023 U.S. ACH network volume increased 4.8%. TCH noted that EPN carried approximately half of overall 2023 U.S. commercial transactions. B2B payments increased almost 11% year over year.

As announced this week, The Clearing House’s RTP Network will allow individual transactions of up to $10 million, following increases in earlier years to $1 million from $100,000. The company said the new limit supports growth in areas like real estate, supply chain payments and B2B transactions requiring higher transaction amounts. (Same-day ACH transaction limits are $1 million.)

For corporates paying vendors or with immediate need for inventory — or with the desire to stretch out cash flow — immediate settlement can be used as a strategic tool, and as a away to improve supplier relationships. Separate joint findings from Ingo Payments and PYMNTS Intelligence have highlighted that as of October 45% of ad hoc payments are sent via instant methods, up from 36% in January 2024 — and ad hoc payments can make up as much as 65% of smaller firms’ accounts receivable activity.

Same-day ACH still is confined to the originating financial institution to submit transactions by clearing windows (two of them, at 10:30 am and 2:45 pm, with respective settlement at 1 pm and 5 pm) each day.

There will still be room for ACH — and same-day ACH — to be leveraged for predictable, recurring transactions tied to payroll or, say, utility bills.

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