Project Description

Three roads heading into a city skyline showing streaked headlights and taillights.
1978 is the year ACH electronic payments became ubiquitous in the United States — a major milestone on the payments progress timeline. But, in nearly four succeeding decades, as countries from the United Kingdom to Japan developed and adopted faster payments systems, little changed in U.S. payments.

Then mobile technology and digital commerce converged. With everything else becoming instantaneous, consumers began to ask, “Why do payments take so long?” In the 20-teens, the need to catch up to the rest of the world and the wireless generation propelled U.S. payment development into action.

Finally! Faster payments arrive in U.S.

In 2015 and 2016, MasterCard and Visa respectively launched push to card payment programs. In September 2016, phase 1 of Same Day ACH went live. In June 2017, Zelle®, previously known as clearXchange, rolled out. On November 14, 2017, U.S. banks exchanged the first, live Real Time Payment (RTP).

Now you have four options for making faster payments. Which methods you choose to use will depend largely on whom you need to pay, what information you have for your payees, and how fast they need the money.

Which payment method is right for your business?

Different methods have different use cases. Peer-to-peer (P2P) payments are the primary use for Zelle. Zelle, Push to Card, and Same Day ACH are all useful for business-to-consumer (B2C) payments. Insurance companies use Zelle or Push to Card to pay auto, home, and disaster claims on the spot. Businesses use Same Day ACH for dividend payments and temporary and terminated employee payroll.

If your disbursements include high volume, low value payments such as rebates, refunds, and class action settlements, or one-off payments to freelancers and contractors, consider these options.

The principal purpose of Same Day ACH and RTP are business-to-business (B2B) payments. Same Day ACH is used to pay taxes and supplier invoices. Expected RTP uses include cash-on-delivery payments, requests for payment, and just-in-time payments.

Information needed for routing payments is another differentiator. Same Day ACH and RTP payments route via bank routing/transfer (RTN) and account numbers. Zelle payments route to email addresses or mobile phone numbers, so payees must first register that information. Push-to-card payments route to debit card information on established card rails.

Speed, of course, is the rationale for faster payments. But how fast is fast? On a scale of snappy to hypersonic, Same Day ACH is snappy with payments settling the day you initiate them by 5:00 p.m. on the receiving depository financial institution’s (RDFI’s) local time. Zelle (short for gazelle) payments can settle in minutes if the payee is registered. Push-to-card payments settle in near real time. RTP literally settles in a flash.

How your treasury benefits

If you still issue checks, faster payments are a sure way to improve customer satisfaction. Checks have the lowest disbursement satisfaction score at 4.4 out of 100.1

Most benefits of faster payments accrue to the treasury department:

  • Cost savings – Reduce payment costs by replacing more costly check and credit card payments.
  • Increased working capital – Optimize working capital by retaining cash until the precise payment due date.
  • Captured supplier discounts – Send faster payments to meet deadlines for discounts offered by suppliers.
  • Synchronized supply chain – Avoid ordered goods being held for payment by making just-in-time payments.
  • Risk – Mitigate the risk of fraud and theft associated with checks.

Your cash flow may even accelerate in the future as customers who need to stretch their dollars begin to make consumer-to-business (C2B) payments on their due date.

For more information, contact your Wells Fargo treasury management representative or fill out the Contact Us form on this site.

1. Disbursement Satisfaction Index™, Q2 2017, in collaboration with INGO