Now There’s an API for Same-Day ACH Processing

When the nation’s automated clearing house network introduced same-day settlement in September, it was only a matter of time before an application programming interface became available to simplify faster clearing. In March, that day arrived with Dwolla Inc.’s announcement that it was commercializing a same-day ACH API.

The code, which had been in pilot for a number of months, is now available as part of the Des Moines, Iowa-based payments company’s set of white-label APIs. These allow on-demand platforms and other businesses to adopt Dwolla’s technology while using their own brands. It’s a move that has taken the young company away from consumer-facing payments processing and into the back-end business of linking clients’ platforms to financial institutions.

Jordan Lampe, who runs communications and policy affairs at Dwolla, won’t specify pricing but says the company has “a fair amount of clients in the pipeline” to use the API.

Emergency payroll is an obvious application, but demand also comes from companies that want to simplify functions like mass payouts to service providers. Sellers of high-end merchandise that need to enable speedy payment are also interested, Lampe says. Nomad, a site that matches freelances clinicians with medical practices, is a client, he says, as is Rebagg, a marketplace for designer handbags.

For now, same-day settlement is restricted to ACH credits, according to rules established by NACHA, the ACH network’s governing body. That has made payroll a leading application, though Lampe argues Dwolla’s early experience shows a wider range of usages will emerge as more APIs become available. “If more companies come out with API access, [same-day ACH] is going to be more useful than just payroll,” he notes.

Debits will become eligible in September, and that, too, is likely to fuel the market, he says. “Same-day ACH is going to blow the market away, especially when debits come out,” Lampe says.

The advantage of the API for service companies, on-demand marketplaces, and the like, Lampe says, is that it takes the mystery out of ACH network operations for non-financial companies. “If we can productize ACH, it paves the way for faster payments in general,” he says. “It simplifies the system, and breathes some new life into the ACH.”

While same-day debits may very well add momentum to APIs like Dwolla’s, their arrival late this summer could also present complications. Experts expect fraud to be higher for faster debits than for same-day credits, for example.

“Credits represent a lower risk profile,” Lampe concedes, but adds the risk could be overstated. “People thought same-day credits were going to be a Y2K,” he notes, alluding to overblown fears at the turn of century that the turn of the new millennium would crash computers. “And yet some brands have seen zero fraud.”

—John Stewart