How Instant Payments Are Reshaping Payroll

Current state of money movement in the United States

The cornerstone of any payroll business is to pay employees on time and accurately. Employees care that they get paid—not how payroll funds are moved. But as a payroll processor, that “how” is important. The vast majority of payments are moved via ACH. While ACH works, it’s an archaic system that has seen little innovation in recent years (much like the payroll industry).

The ACH network in the United States was established in the 1970s. It was one of the first large-scale paperless money movement rails in the world. At the time, it was revolutionary.

That was over 50 years ago. Today, the same ACH network is the default money movement system in the US, responsible for over 80 trillion dollars in transactions per year. While it has evolved somewhat since the 1970s, it’s still the same old system.

So what’s wrong with ACH?

1. Payments take hours or even days to initially settle;

2. Payments can’t be processed on holidays or weekends;

3. Even after payments initially settle, they can still be disputed and removed from your bank account, meaning it actually takes between 2 to 60 banking days for ACH to fully settle (not counting holidays or weekends).

The payroll industry is heavily impacted by the limitations of ACH. Slow payments make it impossible to pay employees in real time, and payroll errors can take days to resolve. Fraud drives up the price of payroll for everyone and outdated technology slows down innovation in the entire payroll space.

The future of instant payments

Between 2017 and 2023, the US banking system introduced two new instant payment systems: Real-Time Payments (RTP) and FedNow. RTP, developed by a private banking consortium, and FedNow, developed by the Federal Reserve, behave almost identically, and both represent a huge leap forward from ACH:

1. Payments settle instantly;

2. Payments can be processed 24/7;

3. Once you receive funds, they’re yours forever.

The benefits of instant payments represent a huge opportunity for payroll. Fast payments pave the way for real-time payroll. Lower risk means lower cost. Tech-forward money movement means more innovation in the space.

Sounds great, right? It is. Except while some banks have been quick to adopt these new systems, many have not. This means that, despite all its flaws, ACH remains the default money movement system in the US.

Introducing 3-day payroll

Check is ready to move on from the ACH era. Instant payments present a huge opportunity that can’t wait for banks to slowly get to universal adoption. In 2024, we rolled out our first implementations of RTP and FedNow. We also invested in more use of Same-Day ACH (SDACH), a faster version of ACH, to bridge the gap as we wait for all banks to adopt instant payments.

One of the first innovations we’ve developed on top of these new payment methods is three-day payroll, replacing our legacy four-day processing speed. Four-day processing is the industry standard for non-accelerated payroll, and we’re excited to move money 25% faster than the competition.

This is just a small step forward. Check’s mission is to make paying people simple. We want to remove all the outdated obstacles that make it hard for employers to send money to employees. Instant payments are a key part of this strategy. We are building toward a future where employees can get paid every day, where payroll is easy to process and payroll errors are easy to fix, where payment failures can be retried instantly, and maybe where employees can access the money they’ve earned in real time.