The reality is significantly slower: often 2-5 business days. How long does an ACH payment take to process?īecause the Fed processes ACH transfers overnight, it’s natural to assume they take, at most, 24 hours to settle in the payee’s account. Most ACH payments proceed this way: the account and routing numbers have been entered correctly, there’s enough money in the payer’s account, and there’s no reason to suspect fraud. The landlord’s account balance will increase by $1000 within 2-5 business days-the time it takes the ACH payment to “settle” or “clear.” The funds will be transferred on the morning of the next business day.Īssuming everything goes according to plan, the tenant’s account balance will decrease by $1000 on the morning of the next business day. Later that day, Thread Bank batches this individual rent payment with dozens or hundreds of other ACH payments they’re originating and sends the batch to the Federal Reserve.Ī few hours later, the Fed sends the details of the transaction to both the tenant’s bank and the landlord’s bank, adding the payment amount (a debit for the tenant, a credit for the landlord) to each bank’s daily settlement volume. Funds typically land in the payee's bank account after 2-5 business days.Įach month, when it’s time for that particular tenant to pay rent, Lando (or actually, their banking-as-a-service platform) creates a NACHA file and sends it to their bank partner (e.g., Thread Bank), who originates ACH transactions on their behalf. After a tenant has connected their checking account (from, say, Wells Fargo) and authorized their landlord to debit the account, the landlord sets up a recurring ACH debit for each month’s rent-say, $1000. One of the services you offer is rent collection: each month, for each of their properties, your customers (landlords) typically initiate an automated ACH debit, “pulling” money from their tenant’s bank account into their own bank account. Let’s say you’re the CEO of Lando, a platform that helps landlords manage their rental properties. And that’s it-ACH payment complete.ĭigital invoices like those offered by Invoice2go are typically paid by ACH. The Fed also sends instructions about which individual accounts to take money out of and put money into.Įach bank executes the Fed’s instructions, sometimes waiting a day or two before releasing funds to the person or business being paid. The morning of the next business day, the Fed sends a “net amount” to each bank, a single payment that represents all the ACH payments involving that bank’s accounts from the previous day. Overnight, the Fed tallies up all the NACHA files they’ve received from their member banks. Periodically throughout the day, your bank batches the NACHA files they’ve received and sends them to the Federal Reserve. Only an authorized financial institution can “originate” an ACH payment on behalf of a payor or payee. Each NACHA file includes information about the ACH payment(s) it describes, including account and routing numbers, direction (debit or credit), and payment amounts. A NACHA file is a set of electronic instructions that triggers an ACH payment when it’s uploaded to your bank’s secure server. When one of your customers initiates an ACH payment through your app or website, a NACHA file is generated. Only an authorized financial institution can “originate” an ACH payment on behalf of a payor or payee.įor this reason, tech companies that make ACH payments available to their customers typically partner with a bank or with a banking-as-a-service platform that has one or more bank relationships built in. Finally, we’ll offer three simple steps to get started. We’ll walk you through an ACH payment and talk about how it works for tech companies and their customers. In it, we’ll briefly cover the history of ACH and define common terms. If you’re a decision maker at a tech company who’s thinking about whether and how to offer ACH to your customers, this guide is for you.
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