Financial Wellness

Behind the scenes on payday

In the US, money is moved between banks on a schedule. But current technology and upcoming changes may speed up this process.

2.5 minute read

When your employer calculates your paycheck and sends your money to you, they’re kicking off a process that involves not just their bank and yours, but several other key players who are in charge of handling your benefits and moving your money safely:

  • Payroll: First, your employer uses their payroll system to make sure all your wages are calculated correctly.
  • Banks: From there, they’ll initiate a direct deposit to the account(s) you've specified.
  • The ACH: In the US, money moves between banks through the Automated Clearing House (or ACH).

What is the ACH?

In the US, the majority of bank-to-bank transfers are sent through a network called the Automated Clearing House. This system ensures your paycheck is delivered securely from bank to bank, rather than relying on a paper check.

The ACH has been around since the 1960s, when the Federal Reserve set out to create a more efficient and automated way to process transactions. And it's been extremely successful: the ACH network provides a safer and more convenient alternative for transferring funds and processes billions of transactions annually.

But as technologies advance and people around the world are getting used to instant transfers, traditional ACH methods have been a bit slow to keep up.

What are batches?

With the ACH, money is moved between banks on a schedule. Transactions are processed in batches throughout the day, usually every 5 hours or so.

Let's take payday as an example:

  • If the originating bank (in this case, your employer’s bank) initiates a transfer at 7am, it may not be processed until noon. But it'll usually arrive at the receiving bank (yours) by the end of the day.
  • If the transfer is kicked off after the last batch of the day, the money won’t be moved to the receiving bank until the next business day.
  • Depending on the receiving bank's policies, the money might be held for anywhere between a few hours to a couple days before it's available to be used.

ACH transfers can be expedited, but faster delivery comes with a fee—similar to paying for overnight delivery at the post office.

✅ This is why employers have a payroll processing deadline that is usually well in advance of your actual payday: to make sure there’s enough time for the ACH and your bank (plus any paycheck-boosting platforms like Exhale) to make your money available on the day you expect.

The future of paycheck delivery

The good news is: innovations in real-time payments have been accelerating in the US.

  • Real-Time Payments (or RTP) is a system operated by The Clearing House that enables instant transfers of funds between banks. It's been steadily growing since 2017.
  • The FedNow system, owned by the Federal Reserve and launched in 2023, also unlocks instant payments. About 5% of banks in the US have joined the FedNow network as of February 2024.
  • In both cases, banks need to opt in to RTP or FedNow to make instant payments available to their account holders.

As more banks get on board with RTP and FedNow, more and more Americans will see same-day transfers become the norm.

Along with financial benefits like earned wage access and automated emergency funds, the average American is gaining control over their paycheck, and that's a change we think is worth celebrating. 🎉