The Clearing House clears real-time payments
October 23, 2014

For many years, the automated clearing house has been one of the leading methods of making payments between banks. It is a reliable and secure system for many customers along with being convenient for banks. There's just one problem: It's incredibly slow, with transactions requiring at least one business day to clear. At a time when credit card processing is almost instantaneous, anything that takes more than an hour, let alone a day, is too slow for consumers and businesses. There have been some mild efforts to address this problem through the National Automated Clearinghouse Association, the trade group responsible for setting rules in the system. However, the one group opposed to such changes has now taken a step to accelerate the process.

Right now, right then
The one group that has been resistant to changes in ACH processing has been The Clearing House. A trade organization representing 24 of the largest commercial banks in the country, it was the cause for the previous failure at ACH reform in 2012, when NACHA attempted to implement same-day payment rules. Given that it controls 50 percent of all ACH transactions in the country, any change required its support, according to Payments Source.

Now, The Clearing House has pulled an about-face by announcing that its member banks would be working on developing a new real-time payments system over the course of the next several years. The timeline on this project is like due to the size of the banks and the need to update infrastructure to process everything in real time. Payments Source suggests that the reason for the change of heart was competing forces. The Federal Reserve, the agency controlling the other half of ACH processing in the U.S., announced plans recently to move forward with same-day payment. In addition, NACHA has announced a new set of rules to more slowly implement same-day payments over the course of the next few years.

There are many benefits for making ACH payments real time. For one, businesses and consumers would be able to send and receive money in real time safely and securely. This is particularly useful in large transactions: Instead of handing over large amounts of cash to a person or business, a customer can simply do the transfer electronically. More importantly, businesses will have a greater grasp of their cash flow, which will allow them to operate more efficiently.

Nexus: G-WEBCD6