A Payment Revolution...Again: Instant Payments & the ACH Connection
Time travel with me for a moment back to the 1970s. Disco music and the American Top 40 countdown with Casey Kasem took over our radios. Blockbusters like Jaws, Star Wars and The Exorcist captivated (or appalled) audiences. There was political unrest with the Vietnam War, the oil crisis and the Watergate Scandal. But these weren’t the only things making big cultural shifts, as the launch of the Automated Clearing House (ACH) would change the payments landscape forever.
And just as ACH revolutionized payments in the 70s, the rise of instant payments today is setting the stage for yet another transformation. While decades of time and innovative technologies separate these two influential rails, there are many parallels between the two, connecting them as two of the most significantly impactful financial advances of our time.
Modern Solutions
In the 1960s, paper checks were the most widely-used source of payments among businesses and consumers alike, but the process was quickly becoming cumbersome as volumes increased. At that time, one check transaction involved multiple steps from start to finish, including sorting, shipping, proofing and more for the originating institution, then again for the receiving institution. With delays, costs and security concerns, the Federal Reserve, with the support of financial institutions, set their sights on a new way to process payments more efficiently. Thus, the ACH Network was born, with the ability to process payments electronically for faster turnaround times, cost-effectiveness and enhanced security.
Fast forward to today, and we can see that the catalyst for instant payments was very similar. ACH has been a dominant method of payment since its launch in the 1970s, but the world moves at a much faster pace than it did back then. Businesses and consumers live in a fast-paced world where goods and services can be traded within a matter of minutes (if not faster) and the payment options available to them need to match that timeframe. Sure, ACH has grown over the years to include same-day processing, but settlement still falls within the one to two day range. In response, the Federal Reserve created the newest payment rail, the FedNow Service, which launched in July of 2023.
Slow Adoption
When ACH first became available, it faced skepticism and slow initial rates of adoption. For many years, most ACH transactions were linked to government payments like social security and Airforce payrolls. Businesses and even financial institutions were hesitant to make an investment into this new technology. In fact, it wasn’t until the early 2000s that ACH transactions started to outpace physical checks in meaningful numbers. But as the world started to adopt a more digital presence, particularly with the introduction of online and contactless payments, the use of ACH quickly skyrocketed. In 2022, the volume of ACH transactions through the Federal Reserve reached 18.5 billion.
Similarly, and despite having clear advantages of real-time availability and reduced risks, financial institutions have been slow to join the FedNow Service. Whether concerns stem from implementing a new system or regulatory compliance, institutions have been particularly cautionary when it comes to instant payments. However, adoption numbers are growing as the competitive advantage of instant payments becomes more apparent. And with a new executive order announced just recently, they are well on track to follow the same pattern as their payments predecessor.
New Mandate, Historical Relevance
The same issues that catapulted the ACH launch into action in the 70s are still alive and well today. In fact, with the incidence of check fraud and the costs to process checks growing higher, President Trump just issued a mandate on March 25, 2025, to eliminate the use of paper checks in favor of electronic payments for all government transactions (with certain exceptions). According to the executive order, “Department of the Treasury checks are 16 times more likely to be reported lost or stolen, returned undeliverable, or altered than an electronic funds transfer (EFT). Maintaining the physical infrastructure and specialized technology for digitizing paper records cost the American taxpayer over $657 million in Fiscal Year 2024 alone.”
With that in mind, the use of electronic payments – including, but not limited to, ACH, debit/credit card, digital wallets and instant payments – are going to get a major boost. According to the mandate, electronic payment systems must be in place for federally-issued government disbursements and receipts by September 30, 2025.
As the government is poised to move exclusively to electronic payments, we’re once again seeing a pattern similar to that of the ACH journey – one where government adoption leads to increased use and, therefore, adoption by businesses and consumers. That means one thing…instant payments are set to become even more prominent over the next year and beyond.
Shaping the Future
As we look back to the journey of ACH, we can see now that it wasn’t just a new option for payments – it marked a fundamental shift in the way people and organizations move their money. It automated payments – from payrolls to tax refunds – and created efficiencies that we still utilize in today’s modern age. But instant payments is taking the revolutionary impact of ACH and stretching it even farther, redefining the speed with which funds can move and making them available for instant access. We may not be talking about space here, but instant payments truly are “one giant leap for mankind” in the financial world.
Join the Revolution
As your credit union is preparing for the future, ensuring compliance with government mandates and making strategic goals that will ensure your success over the next several decades, instant payments need to be at the top of your list. There are many institutions that are taking the leap and offering these services that can support their members with real-time access to funds.
And the good news is that Vizo Financial and our payments CUSO, MY CU Services, are already in the game, ready to help you start your instant payments journey. We’re a certified correspondent with the FedNow Service, offering various services for credit unions. With these capabilities, your credit union can bring instant payments to your members, giving them greater control over their finances.
Most recently, Vizo Financial acquired the ability to receive FedNow instant payments on behalf of our members – the credit unions. For example, if one of your vendors wishes to send an instant payment transaction to your credit union via the FedNow Service, we can receive those payments through our routing and transit number and they will post directly – and instantaneously – to one of your eligible accounts (i.e., the settlement account, overnight account or subaccount).
No matter which route you choose to take with instant payments, there is no denying that the way we move money is undergoing a major shift – one that bears remarkable similarity to that of ACH in the 70s. With more than 50 years since ACH launched, we’ve seen it change the course of modern payments. Instant payments is following the same trajectory, so it’s a matter of when, not if, your credit union should embrace this new rail. If ACH has taught us anything, it’s that the world keeps moving…I mean, how many feathered hairdos and leisure suits do you see these days? Make sure your credit union is poised to keep up – find out how you can join the instant payments revolution today!
For more information about Vizo Financial and MY CU Services’ instant payment options through the FedNow Service, please visit our Instant Payments: The FedNow Service page or contact your corporate account manager at accountmanagers@vfccu.org.
As the VP of sales, marketing and education for Vizo Financial, Jaime Agostino oversees marketing, sales and educational offerings for the Corporate. Ms. Agostino holds a Bachelor of Science degree in marketing from the Pennsylvania State University. She currently holds her Series 7 (Registered General Securities Representative) and Series 63 (Uniform Securities Agent State Law Examination) investment licenses from the Financial Industry Regulatory Authority (FINRA), and has also achieved the following professional designations: Certified Trade Show Marketer (CTSM), Credit Union Development Educator (CUDE), SIE - Securities Industry Essentials Examination, Inbound Marketing Certified and Content Marketing Certified.