January 17, 2018
With Venmo and other similar money transfer services seeing strong spikes in usage in recent years, the demand for nearly instant money transfers at low or no-cost finally appears to be on the rise in the US. The vastly outdated system of Automated Clearing House (ACH) transfers, sometimes referred to as electronic checks, is in serious need of update. If it only takes people a few seconds to transfer money between banks in the UK, and we’ve got just as good of infrastructure regarding physical wires that connect banks together, it only makes sense that we can improve the speed of ACH transfers here in the US. It’s unclear why exactly the improvements to our outdated ACH system haven’t already been made, whether due to cost, pushback from banks, etc.; however, few would argue that the current ACH system that originated in the 1970s should still have the same practices as following bankers’ hours or waiting for ‘batch’ processing, which ultimately could result in taking multiple days to process the transfer.
I found the history of the ACH system fascinating. If you’re interested in hearing about this in more detail, check out this NPR’s Planet Money podcast episode that does a fantastic job of researching and telling the history of the ACH electronic network: The Invisible Plumbing Of Our Economy