ACH payments are a fast and secure way to move money from bank to bank, and it makes sense to use ACH payments where you can.
Here at Sila, we send all bank-to-bank money transfers through the ACH network, which largely operates on the standard banking schedule. However, while many holidays hold up ACH payment processing, the Sila API is able to facilitate those transactions even on most banking holidays.
When you send an ACH payment, you need to know when the funds will be processed so that you can plan your direct deposit payroll schedule, bill payment schedule, and/or savings goal.
To help you better understand this process, this article will go over the following:
- How ACH payment processing works with Sila
- How long it takes to process an ACH payment with Sila
- Whether an ACH payment with Sila is processed on bank holidays
How Does ACH Payment Processing Work?
An Automated Clearing House (ACH) payment is a convenient way to send money electronically from one bank to another. In order to complete this transfer, it needs to go through an approval and operational process.
ACH payment transfers operate solely within the ACH Network. This network is composed of ACH Operators, such as the Clearing House, the Federal Reserve, Receiving Depository Financial Institutions (RDFIs), and Originating Depository Financial Institutions (ODFIs). ODFIs and RDFIs can be a bank, credit union, or third party payment processor.
The National Automated Clearing House Association (Nacha) administers this process and sets ACH rules and guidelines. We, as consumers, are also a part of this process as we are typically the Receivers and Operators who send and receive ACH transfers.
The ACH transfer must follow the ACH regulations established by Nacha. This process might be simple to understand, but there are a lot of hoops that money needs to jump through in order to be successfully transferred.
Think of an ACH payment in two forms: as an ACH debit and as an ACH credit.
An ACH debit is when one person (called the Originator) sends an ACH request for money to be taken out of another person’s bank account (called the Receiver). An ACH debit might typically occur when you need to pay a bill or deposit money into a savings account, IRA account, or tax-free account. An ACH electronic payment, like a payroll submission, can be set up as recurring payments based on a designated payment date.
An ACH credit is when the Originator sends an ACH request to deposit funds into another person’s (or the Receiver’s) bank account. An ACH credit will typically occur when you receive money from an employer, via direct deposit, or when you receive a tax refund in your checking account. ACH credits can be set up as a recurring bill payment.
The ACH Process
Whenever someone wants to make a bank-to-bank payment, there are several things that need to be in place first. The Originator needs to have prepared their bank account number, routing number, the name of their bank, and their full name in order to make the request. They will also need the same information from the Receiver. The financial institution that both the Originator and the Receiver works with needs to be certified by Nacha to be an ODFI and RDFI.
Let’s take, for example, a direct deposit. The ACH process for direct deposit works like this:
- An Originator will fill out an ACH entry request form with their financial institution (the ODFI) either in person or with online banking; this is also referred to as the ACH Origination. The employer would be the Originator and they would need to be authorized to make this transaction with the required banking information from the employee.
- The ODFI sends the ACH entry request form to the Clearing House for approval; the ODFI has two windows during business days to send these requests and they are usually sent in batches.
- If processing a same-day ACH request, then the entry request will be approved that day or the earliest business day by the Clearing House and The Federal Reserve.
- If processing a standard ACH request, then the entry request will be approved the following business day by the Clearing House and The Federal Reserve.
- The RDFI needs an additional business day to process the money; the money may show as pending depending on the transaction type.
- The money lands in the Receiver’s bank account as cash—payday! The employee will be paid; if the payment schedule is processed according to these timelines, then the process would have started at least 3-4 business days before payday.
Because the money is changing hands so often within the ACH Network, each entity that interacts with the money needs to verify that the money transfer has not been compromised in any way at each individual point.
So while the ACH request needs time to be processed, these are added protective measures that the banking system and Nacha have set up for security and continuity. This process allows the RDFI to monitor the request and report it as fraudulent or an error. The ACH transfer request then comes back as fraudulent, and the Originator will be alerted with a return code to indicate the reason why the ACH transaction could not process.
While there are many pros and cons associated with the ACH process, this process is far more reliable and affordable than paying with a credit card or sending a wire transfer.
Using Sila Tokens
When using Sila to complete the ACH transaction, there is one extra step that needs to be taken: the issuing and redeeming of Sila tokens.
When sending an ACH request with the Sila API, you are really transferring dollars into Sila money, or Ethereum. Therefore, in order to allow the receiver to transfer those funds into their currency, you must first transfer your current currency into Sila money.
Before you send an ACH request, you will use the Sila API in order to deposit Sila tokens. When an ACH debit is sent, Sila tokens are issued immediately in the receiver’s bank account. When an ACH credit is sent, the funds show in the bank account, and then the Receiver has to issue a /Redeem_sila request. The funds show up the next day.
How Long Does It Take to Process an ACH Payment
ACH transfers are not instant. Processing has to occur at every ODFI, RDFI, and at the Clearing House itself. Nacha also takes time to audit the ACH payment trail in order to verify that each ACH transaction was authentic.
In addition to processing times allotted for ODFIs and RDFIs, the Federal Reserve has its own processing time.
You can access the FedACH Processing schedule here.
Sila and the ACH Network have three different types of ACH payment processing: standard ACH request (ACH debit and ACH credit), same-day ACH request, and requests for redeeming Sila tokens.
Standard ACH Transaction
A standard ACH transaction will process within 3-4 business days of the initial request. This is because a standard ACH transaction gives an allotted amount of time for each RDFI in order to issue a return code. The RDFI has 48 hours to issue a return to the ODFI.
Here is what a standard ACH debit looks like with Sila:
- On Monday: A user sends an entry request for an ACH debit.
- Tuesday: Funds are withdrawn from the requested bank on Tuesday morning.
- Wednesday: The RDFI has 48 hours—until Thursday morning—to report a return code. This gives Sila enough time to wait for return codes and then process the ACH payment.
- By Thursday: The funds are settled by 4 PM and Sila tokens are issued at that time.
Same Day ACH Transaction
A same day ACH transaction is a type of process that allows banks to send ACH entry request forms more often each day. Same day ACH entry requests can be sent in batches up to two times each day.
As of June 2020, the times an ODFI can submit same day requests is at 10:30 AM and 2:45 PM EST, with the latest settlement being at 5 PM EST that day. By March 19, 2021, the latest settlement time will be extended by two additional hours.
Timelines for Sila Tokens
Timelines for issuing and redeeming Sila tokens are minimal.
For sending an ACH debit, a Sila token is issued immediately for the Receiver. However, when sending an ACH credit, a Sila token must be requested and it will be deposited the following day.
Are ACH Payments Processed on Bank Holidays?
Most ACH payment processing must abide by the standard bank holidays. In general, ACH payments will not be processed on the following holidays and instead be delayed for at least one business day:
- New year’s Day
- Martin Luther King Jr. Day
- Presidents Day
- Memorial Day
- Independence Day
- Labor Day
- Columbus Day
- Veteran’s Day
- Thanksgiving Day
- Christmas Day
Banking holidays have traditionally held up the processing of all banking transactions. Banks recognize many of the national civic holidays to allow for employee time off.
Therefore, if an ACH request is made on a banking holiday or near a banking holiday, then the processing of that request could be delayed. And if this holiday falls before or after a weekend, then it is likely that you will need to account for an additional 1-2 business days to see that request processed.
Typically the banking holiday will only be one day. However, some banks might average out a span of a few days and process all the ACH requests on one of those days.
For example, for a bank holiday like Christmas Day, the days December 25 to December 27 might fall under the banking holiday. However, depending on the bank, they might process all of the requests made from December 25 to December 27 on the 26th or the 27th. This varies with each bank and each year.
Does Sila Process ACH Payments on Bank Holidays?
Sila accepts ACH transactions made by 5:45 PM PST on every U.S. Federal Holiday, except Christmas Day. Sila will handle ACH requests received by 5:45 PM PST on the Federal Holidays listed below:
- January 1, 2020, New Year’s Day
- January 20, 2020, Martin Luther King Jr. Day
- February 17, 2020, Presidents’ Day
- May 25, 2020, Memorial Day
- July 4, 2020, Independence Day
- September 7, 2020, Labor Day
- October 12, 2020, Columbus Day
- November 11, 2020, Veterans Day
- November 26, 2020, Thanksgiving Day
- January 1, 2021, New Year’s Day
Sila will not handle any ACH requests received on the Federal Holiday listed below:
- December 25, 2020, Christmas Day
Sila: Moving Your Money Faster
Sila’s API offers secure payment processing through the Ethereum blockchain, and Sila’a digital wallet API can link to any U.S. bank account for easy in-app payments.
Sila can also process ACH transactions quickly and on almost every standard U.S. banking holiday.
If you are looking to complete a bank-to-bank transfer, considering using the powerful financial technology that Sila has to offer.