In 2018, the ACH network of digital bank-to-bank money handoffs saw a record year of nearly 23 billion payments. ACH has rapidly eclipsed the popularity of the quaint paper check, who only saw 16 billion exchanged over the same period. The practice of paying a credit card bill or dispersing bi-weekly salaries by signing paper checks and packing envelopes seems arcane by modern standards.
Although a stalwart of the banking industry, even the ACH system is not safe from the changing landscape of payment processing. FINTECH brings a bustling industry of agile disruptors chasing real-time payment models. Quick-moving, easy-to-use platforms lure younger demographics with speedy payments and the ability to receive money without the red tape of opening a traditional bank account.
One main obstacle hindering the evolution of ACH: many financial institutions cling to familiar, yet limited, legacy banking software. Built as a single unit, every functionality is intertwined like a spiderweb. The strain of user demands and the speed and scale of data pull on one strand and stretch, tighten, and contort the entire design to its limit. To combat this entanglement of codependent code, engineers patch more layers on top of pre-existing code. Slowly but surely, hulking codebases resist the type of agile updates demanded by the changing payment processing landscape.
New, modernized technologies are at the forefront, working alongside banks to help them leverage the power of ACH. Here are three considerations driving this evolution.
Accelerate the speed of settlement
The internet has equipped customers with powerful tools to schedule recurring ACH payment installments, or to trigger same-day ACH for utility or credit card bills. The speed at which customers can leverage the power of ACH has dramatically accelerated, yet many legacy banking platforms languish. Prolonged, labored steps lie between the customer clicking “Submit” and the ability for a bank to actually post the payment.
“Same day settlement” is an appealing development that can help banks remain competitive in the changing payment processing landscape. However, many institutions view the necessary overhaul to existing systems as cost-prohibitive.
Platforms like ProcessMaker can supplement your current processes and offer exponential opportunities for growth in automation. Instead of drowning your team in added paperwork or manual tasks, you can set up a lightning speed cascade list of automated processes. Each transaction moves through a set of parameters, quickly checking the required regulatory and security boxes. Any transaction that does not meet your stringent set of standards can send immediate alerts to your team.
Meet the demands of the new economy
Businesses are attracting talent in new and exciting ways. Rideshare drivers, food delivery services, freelance programmers, and other independent contractors often perform essential duties through a rich ecosystem of apps serving as the middleman. While there used to be one or two main freelance rideshare marketplaces, hundreds of new entrants are now clamoring for a piece of the pie. Businesses now face steep competition to woo much needed gig workers, and speed of payment is one of the most alluring perks. In fact, 73.7% of gig workers said they would leave a marketplace over payment issues. Such marketplaces need the support of banks in order to meet the demands of their contractors.
To address these burgeoning needs, The ACH Network has pushed several new initiatives. By expanding the processing window by 2 hours, businesses now have until 4:45p ET for same-day ACH. Banks need to adjust their processes to allow their business clients to take advantage of these new opportunities.
Empower businesses with a global workforce
“The office” used to refer to a single HQ, but current trends propel a workforce diaspora. One single department can consist of a marketing coordinator at their dining room table in Berlin and a social media specialist in Miami. The gig economy adds even more global talent to the mix; adding in social media support staff in Toronto and an SEO expert in Rio de Janeiro. The remote workforce adds new payment processing challenges for companies and banking institutions alike.
Businesses need reliable ways to remit payments to their global teams, without the headaches. Banks need to learn to adapt to this massive sea change by offering easier, quicker foreign exchange transfers and the ability to send payments in native currencies to the beneficiary country.
How banks modernize their systems to adapt to the modern demands on ACH payment processing is one of the main drivers that will define their ability to both attract new customers and remain ahead of the technology curve.