Adding Instant ACH To Your Financial Features

Bank Account API Linking Through Plaidtures

Your banking app with 20,000 users is excelling, and you want to continue to add features that appeal to your market. Your competitors are enabling wire transfers, loyalty programs, and credit card programs, but you’ve already got a debit card feature and loyalty programs, and wires aren’t the way you want to go. 

Whatever your reasons are, you should want to provide more useful features to your fintech customers. If you already offer ACH debits and ACH credits along with the ACH network, then you’ll want to grow to provide Instant ACH and/or same-day ACh transfers to make sending money through your product super simple.

With NACHA releasing instant ACH to the public there will, of course, come a rush of competitors who also want to offer this service, so getting this key financial feature integrated into your online banking service quickly will payout in the long run. 

Growing Your Service Offerings With ACH API

If you want to offer instant ACH to your customers, then you’ll first want to understand how adding that feature fits with your scenario. Do you already provide ACH transfers for your customers? Or will you need to add an ACH API in order to do so?

Getting connectivity to the ACH network is key when it comes to adding instant ACH to your financial features. The ACH network is the cash transfer network powering the U.S. economy and the only way you’ll be able to provide Instant ACH, so this step is crucial.  

Gaining Initial Access to the ACH Network

If your payment app does not have access to the ACH network, then you’ll need to begin making this move toward an ACH API, which is the best way to add this feature. ACH APIs are middleware software programs that enable businesses and other non-bank entities access to banking endpoints, like ACH transfers. 

The ACH transfer, which stands for the Automated Clearing House, is an external transfer that is approved to move through the Automated Clearing House, through the Federal Reserve, and to the recipient. Both the originator and the recipient have to be approved to send and/or receive an ACH transfer (depending on the relationship of the transfer). 

So in this case, you’ll need to ensure that the originator and/or the recipient bank account are appropriately attached to an ODFI and/or an RDFI bank. This basically means that the ACH network has approved that banking originator or recipient to operate along the ACH network. 

Gaining access to the ACH network as a non-bank entity is rather difficult. If you’re a fintech founder, you’ll need to source a bank relationship. Partnering with a bank sponsor can be costly (millions of dollars to start up and then millions of dollars in operating costs annually) and then this can cause significant issues. Not only is this a lot of time and money, but then you’ll also be in charge of a host of other things like maintaining the tech to fit your product bill and maintaining compliance (which the bank doesn’t really help you out with). 

Your best bet when adding in ACH API as an offering is to source a partner platform like Sila. Sila sells access to its operating software, which has an ACH API, a digital banking wallet, the SILAUSD stablecoin, and KYC/KYB (a key feature for identity verification on the ACH network). This enables quick setup for bank transfer capability and access to the ACH network. All of these software tools can be built simply and then tested, configured, and white-labeled in the Sila sandbox. Boom. There you have an ACH API, without the need to pay anything before the API is ready to launch. 

If you have a mobile banking product already, then you’ll want to check on integration and compatibility with our engineering team before signing up. But you can also easily check integration in our free Sandbox. Embed the ACH API and other Sila APIs into your current tech stack or build a banking app from the ground up.

From here, you can add the Instant ACH features that Sila will provide, assuming that eligibility requirements are met.

Accessing the ACH Network Benefits

If you already have access to ACH payment processing and you want to add Instant ACH, then you’ll want to vet the partner that you go with to ensure that they offer compatibility and Instant ACH. If you’re already with Sila, then you know you’re good to go. From there it’s as simple as allowing the instant ACH payment handle to operate within your API parameters and testing its functionality in the Sandbox.

With Instant ACH, you transfer money and these funds are instantly available in the receiving customers’ bank account. The trasnfer is treated as if the funds are credited. This type of transfer assumes, through identity verification, that the originator is worthy of the credited amount, and this gives the recipient the benefits of receiving that payment much faster than standard ACH transfer timelines.

Accessing these benefits have more to do with your current setup. If you’re working with a partner platform like Sila, then you can trust in their acceptance as a bank agent, ODFI, and RDFI to add Instant ACH and other ACH Network Benefits. If you’re working with your bank, then you’ll have to connect with them to pinpoint what it takes to add Instant ACH. 

Hopefully, they won’t require you to move a certain amount of funds annually (as this is usually the case) or that there isn’t too much configuration with the middleware or API software that you are using.

Advantages and Restrictions on ACH Payments and EFTs

Benefits of Instant ACH and Same Day ACH

Same-Day ACH comes with a number of benefits, including: 

  • Same-day payroll
  • Flexible, emergency payroll and missed deadlines
  • Supporting business’ need to pay hourly workers and enabling employees to get paid faster
  • Ease in setting up recurring transfers
  • Faster business-to-business payments
  • Faster invoice settlements between trading partners
  • Remittance information for each payment
  • Expedited bill payments using both ACH credits and debits
  • Better on-time online bill pay for consumers
  • Faster crediting for late payments
  • Better account-to-account transfers
  • Faster crediting for consumers who move money throughout their own accounts

Restrictions on External Funds Transfers

You can send money from bank to bank through the ACH network but you should be advised of some of the limitations. 

For example, most users are limited on the amount of money that can be sent daily, weekly, and monthly (otherwise known as amount limits). Savings accounts are usually very limited in their ability to send money, so be aware. 

There are also cut-off times, where a transfer won’t be processed until the next business day. For example, same day transfers on a Friday might not happen until Monday. 

With most situations in money transfers, there will be a fee for insufficient funds. You should be aware of this fee as well as the fee for stopping a transfer. 

International transfers are often unavailable for ACH, but you can look into IAT and third party senders

Luckily, with Sila, there are reasonable limits on how often you can transfer money. Clients are charged modest insufficient funds fees, so this fee does not have to be exorbitant by the time your client pays it. We also offer international transfers through several of our partners

Different Types of ACH Payments

  • Standard ACH Transfer: A standard ACH transfer can include an ACH debit or an ACH credit and it is the standard way to send money along the ACH network. This is the electronic movement of money between banks through the Automated Clearing House (ACH) network. This can be a person-to-person payment, external funds transfer, bill payment, direct deposit, payment from employers or government benefits programs, business-to-business payments, and others. Sending money to friends requires third-party apps (like Venmo or Zelle) but they still use the ACH network.
  • ACH Debit: The ACH debit is one part of the ACH transfer and it occurs when money is taken out of an account. This transaction is initiated by the originator and is requesting the ACH network to take money out of their own account. In the same vein, the other party involved in this transaction would be completing an ACH credit. However, the primary transaction relies on the request from the originator.
  • ACH Credit: The ACH credit is one part of the ACH transfer and is when money is deposited into an account. The transaction is initiated by the originator and is requesting the ACH network to put money into their account. In the same vein, the other party involved in this transaction would be completing an ACH debit.  However, the primary transaction relies on the request from the originator.
  • Same Day ACH Payments: Same day payments are payments approved by the Automated Clearing Hosue to be issued on the same day. These payments aren’t instant; the first window is 10:30 AM ET with the settlement occurring at 1:00 PM ET. The second window deadline is 2:45 PM ET, with settlement occurring at 5:00 PM ET.
  • Instant ACH: Instant ACH is a new feature made available by the ACH network to issue instant ACH credits. The instant ACH is faster than same day ACH payments but falls under this same feature on the ACH network.
  • Real-time Payments: ​​Real-time payments (RTP) are payments that are initiated and settled nearly instantaneously. This refers not only to ACH payments but also wire transfers and other payments that can be near instantaneously. The only payment that is real-time on ACH currently is an ACH credit.

Managing ACH Transfer Times

While ACH is the only way to send cash in the United States, it takes a notoriously long time. Unlike the real-time nature of wire transfers, ACH transfers are processed in batches only 7 times a day. 

This is particularly why the instant ACH feature was added to the ACH network offerings; not only does it encourage more people to use ACH transfers (as opposed to wire transfers, for example), but it also increases the value of the ACH network and its reliability. It is also a great excuse for the ACH network to increase its customer due diligence. If a business or bank entity wants to allow instant ACH, then additional verification requirements are needed, and this enables these entities to be even more secure and verified with the ACH network. 

  • Standard ACH Transfer (including ACH debit and ACH credit): 3 to 4 business days
  • Same Day ACH: Within four hours if submitted before two time points during a banking business day, although the rules have recently been expanded.
  • Instant ACH: Nearly instantaneous and only for ACH credits
  • Real-time Payment ACH: Next business day for ACH debits

The speed of ACH that you have access to, as mentioned, depends on your current bank relationships or platform partners. Additionally, each entity might charge you something to initiate a faster ACH transfer. This can be on average $3 to $4, which is far cheaper than the $20 to $45 that wire transfers can cost.

Learn more about estimating ACH transfer times here

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