⏰ Est reading time: 4 mins

💡 What you’ll learn:

• What ACH is and how it works
• Limitations of ACH payments
• How ACH direct deposit compares to Branch

What is ACH?

ACH stands for “automated clearing house,” a network used to process financial transactions. It allows individuals and businesses to transfer money electronically, whether it’s for paying bills, direct deposit, or moving funds between bank accounts.

The ACH network facilitates both debit (pulling money from an account) and credit (depositing money into an account) transactions. It's a fast, secure, and low-cost way to handle payments compared to older methods like checks or wire transfers.

Most workers get their pay through direct deposit, specifically through the ACH rail. (In 2024 alone, the ACH network processed approximately 33.6 billion payments!) One of the reasons it’s become such a default payment method for direct deposit is because it works with every bank in the U.S., allowing any employer to send workers direct deposits through their payroll system. It’s also a relatively cost-effective option to pay your workforce.

How Does ACH Work?

The ACH system operates through a series of steps that help ensure transactions are completed quickly and securely:

1. Initiation: The sender (person or business) authorizes the ACH transaction. This could be a direct deposit, automatic payment, or money transfer.
2. Batching: ACH transactions are grouped together into batches. This batch is submitted to an ACH operator, which processes multiple payments at once, reducing the cost and time for each individual transaction. There are certain time windows or “cutoff times” where all ACH transactions need to be batched and sent by. The time the batch was sent for processing dictates whether the payment will be sent as next-day or same-day. 
3. Processing: The ACH operator (such as the Federal Reserve or a private processor) verifies and clears the transaction. This involves checking the availability of funds, ensuring there are no errors, and forwarding the transaction to the receiving bank.
4. Settlement: Finally, the funds are transferred to the recipient's bank account, usually within 1-2 business days.

Limitations of ACH

While ACH has become a popular and reliable payment method for direct deposit, it has significant drawbacks. Namely: how long it takes, frequency limitations, accuracy, and inability to process on weekends or holidays. 

• How long it takes. ACH payments typically take 1-3 business days to clear. In some instances, such as direct deposit for workers’ earnings, that length of time may pose issues. It can also be unsettling to not know exactly when a payment will hit someone’s account; the timeframe of 1-3 days makes it hard for someone to know if a payment was sent yet or if it’s still processing. 
• Can’t operate on weekends or holidays. If you’re hoping to send ACH payments on weekends or federal holidays, you’ll need to look elsewhere. ACH payments depend on business days, because that’s when the Federal Reserve is open for processing transactions. This makes paying someone on a Friday, or just before a holiday weekend, tricky, because you can’t guarantee when they’ll get their money. 
• Frequency limitations. ACH settles payments four times a day, which may sound like a lot, but if you’re hoping to send someone their pay and have it immediately appear in their account, you’re out of luck. At best, ACH processes payments same-day; which typically means that you’ll need to submit the ACH request before 11am CT, and the recipient will get it by the end of their day—usually around 6pm CT. If you miss the same day cutoff, they won’t get their money until the next day. 
• Lack of verification. When you send someone money via ACH, you don’t receive confirmation that it was sent properly; there’s no way to trace that the money landed in the correct account. You’ll only find out if it didn’t work, when you have an unhappy employee who didn’t receive their direct deposit. If you use ACH, you have to be 100% sure that the employee keyed in their account and routing number correctly; being off by even one digit could send the money to someone else—who will probably jump at the chance to claim some extra cash. 

The Best of Both Worlds: Branch + ACH Options 

If you’re tired of the constraints of ACH payments for direct deposit, Branch can help. Eliminate payroll hassles and achieve payments piece of mind by offering Branch, giving you a way to send payments to workers 24/7—nights, weekends, and holidays included—and have funds show up immediately in workers’ accounts.

While Branch users may make transfers to external accounts via ACH, Branch does not use ACH rails to send payments to workers. There are no cutoff windows, and we allow your business to send payments any time you wish—nights, weekends, and holidays included.

Plus, Branch allows you to verify that payments have been sent and received, providing end to end transparency and peace of mind. 

Through Branch, workers gain:

• A digital bank account and Mastercard debit card* with fee-free options. No overdraft fees, late fees, or minimum balance requirements.
• Fast access to earnings, because employers can push worker payments at any time—even as soon as the job is complete.
• Financial wellness tools like cashback rewards, a savings goal feature, personalized spending insights, and more. 

See Branch in action with a free demo

*Branch is not a bank. Banking services provided by Evolve Bank & Trust, Member FDIC. FDIC insurance only applies for eligible accounts should the bank holding your funds fail. The Branch Mastercard Debit Card is issued by Evolve Bank & Trust pursuant to a license from Mastercard and may be used everywhere Mastercard debit cards are accepted.

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