Electronic payments speeding up

People who need to send cash to friends or relatives to, say, split the monthly bills or pay each other back after a night out, finally have better options.

Sure, sending money to friends is easier today than it was back when writing a check or running to an ATM were our only options. But even with the rise of person-to-person money-transferring apps such as Venmo, most people still have to wait at least a day before money can be transferred from their Venmo accounts to their actual bank accounts. Because of that and other lags, many people still use actual cash when handling these smaller transactions.

The good news is that a slew of upgrades and new services being rolled out now and over the next couple of months are speeding up how quickly we can move money digitally. (At last.)

“Right now we’re at the very beginning of sea changes for payments for consumers and for businesses,” says Jane Larimer, executive vice president of Nacha, which administers the network financial firms use to send money between banks.

Here’s an overview of the ways that money is starting to move faster:

• Banks upgrade their networks.

The 1970s-era technology that banks use to transfer money securely to other financial firms is finally getting an upgrade. The network, known as the Automated Clearing House, previously processed payment requests only once a day, typically overnight. That meant that it could take one to three business days for a cash transfer to clear. (It’s the reason you need to schedule online bill payments at least three days before the due date, and why it could be a few days before the money in your PayPal account shows up in your bank.)

But as of Sept. 23, the ACH system now processes transfer requests at least three times a day. The first step in a long-awaited upgrade makes it possible for transfers to be completed in the same day that they’re initiated. For instance, an employer can now submit a direct deposit request for an employee in the morning and have the money show up in the worker’s bank account that evening, Larimer says.

Because these transfers typically happen behind the scenes, consumers may not notice much of a change. Small businesses or other companies may find that the faster processing system makes it possible for them to offer direct deposit to their employees now that they no longer have to start the process three days in advance, Larimer says. But as further improvements are introduced, some consumers may notice faster paychecks, speedier bill payment services and other upgrades to the way they send cash electronically, she adds.

• Zelle, the wannabe Venmo-killer.

In an effort to battle Venmo, Square Cash and other third-party cash-transferring services, some of the nation’s largest banks joined forces this year to roll out a service that lets consumers send each other money within minutes. The transfer service has been rolled out quietly over the past couple of months by big banks including Wells Fargo, JPMorgan Chase, Bank of America, Capital One and U.S. Bank. Customers of participating banks can use their mobile banking apps to send money to friends using their email address or phone number and have it processed in the same day.

The faster service is part of an upgrade to clearXchange, a person-to-person payment network that banks use to let consumers send each other money. Previously, only people who used the same bank could send each other cash instantly. Sending money to someone at another bank used to take at least a day. The network will be rebranded and promoted next year under the name “Zelle.” In the meantime, consumers can access the service through their bank’s own money-transferring service. For example, Chase’s person-to-person service is called QuickPay and Wells Fargo’s program is called SurePay.

• PayPal, Venmo and others speeding up.

Starting next year, most consumers with money in their Venmo or PayPal accounts will be able to instantly move that cash to their bank accounts. The upgrade will speed up the current system, which requires users to wait at least a day before the money shows up in their accounts. PayPal, which owns Venmo, announced this summer that it would partner with Visa and Mastercard to make the faster cash-outs possible for customers with a Visa or Mastercard debit card. (Both of the credit card issuers have recently introduced their own real-time money-transferring services.)

By making it easier for people to transfer money to their banks, PayPal hopes that consumers will use the service to shop or send money more frequently, a spokesman said. But the change will also be beneficial for small-business owners, roommates or other people closely depending on the money in their Venmo or PayPal accounts, the company says.

Consumers are catching on to the new options. ClearXchange moved more than $16 billion in person-to-person money transfers in the first quarter, compared to the $3.2 billion moved by Venmo in the same time period.

But people may be using the services differently. A typical transfer through clearXchange is larger than $350, while a normal Venmo transfer ranges from $25 to $40, according to an analysis by Credit Suisse.