The case for modernizing ACH: Why banks are moving now

Booshan Rengachari, is the founder & CEO of Finzly, a cloud-native payments and financial infrastructure company serving banks and financial institutions.

ACH supports payroll and direct deposit, but the underlying banking infrastructure was designed decades ago and was not built to meet today's fraud prevention, compliance, and real-time risk management requirements.  

Nacha’s March 2026 fraud monitoring deadline introduced a new requirement for banks processing ACH payments: actively detecting transactions sent under false pretenses, including business email compromise, vendor impersonation and payroll fraud. That goes beyond authenticating payments or reviewing fraud after money has already moved.

That matters because ACH is the backbone of payroll, direct deposit and a large share of U.S. business payments. Yet many banks still run it on decades-old batch systems designed long before real-time fraud monitoring became an expectation.

Phase 2 takes effect on June 22 and extends the rule to all remaining institutions,  regardless of volume. Banks will be expected to monitor for suspicious ACH activity tied to scams and false-pretense fraud, document how those controls work and show they are doing more than simply authenticating transactions or investigating losses after the fact. No threshold exemptions left.

Banks are scrambling. But the challenge is as much about infrastructure and rising ACH volumes as it is about fraud.

Most ACH systems still run on mainframe architecture, some going as far back as the 1970s. Banks cannot do risk-based, real-time fraud detection on a system designed to run files overnight. You can bolt something on. You can get close enough to technically clear the bar. Examiners will eventually want to know whether that’s real fraud monitoring or a checkbox.

Which gets to the bigger problem Nacha’s rules are really exposing.

Nacha’s new fraud rules may be the immediate catalyst, but they expose a deeper infrastructure problem. Banks cannot deliver modern fraud controls, real-time visibility and unified money movement on ACH systems built for overnight batch processing, which is why ACH modernization has moved from a long-term IT project to an operational priority.

Modernizing the forgotten rail

Banks have spent the better part of a decade modernizing everything else. Wires migrated to ISO 20022 and instant payments got purpose-built cloud rails. Meanwhile digital banking transformation is underway at institutions of every size. YetACH, the highest-volume payment rail in the U.S. and the backbone of payroll, B2B payments, direct deposit for tens of millions of Americans, has remained largely untouched.

There was always a reasonable-sounding argument for why. ACH always seemed to just work well enough. Batch cycles are predictable. The failure modes are well understood. Nobody wants to touch the thing that keeps payroll moving.

The fraud rules are one signal in a longer pattern. As fintechs set a new standard for visibility, corporate clients now demand that traditional ACH rails deliver that same level of proactive real-time insight: transaction-level visibility, straight-through processing, exceptions handled without manual intervention. None of that is easier on a dusty old batch processor.

What leading banks are realizing is that modernizing one rail at a time only recreates the same fragmentation in a new form. The next phase of modernization is consolidation leaving the unbundling era behind us. That looks like a unified operating model where payment processing on every rail and asset – both fiat and tokenized, is orchestrated from a single platform, with one control layer, one compliance posture, and the composability to add emerging rails, including stablecoins and tokenized deposits, without rebuilding from scratch each time.     

Why banks are moving now

The argument against ACH cloud migration has always been the complexity of it. Fifty years of accumulated rules, return codes, exception handling, file format variations. ACH is genuinely the most operationally intricate rail in the system. 

If you don’t have to perform open heart surgery, it’s probably best not to. That excuse doesn’t fly anymore, which is why we’re seeing an unprecedented wave of modernization projects underway.

Metropolitan Commercial Bank retired its legacy ACH mainframe earlier this year. That’s not running modern infrastructure alongside it, not in a parallel processing arrangement, but fully decommissioned. In doing so, MCB modernized ACH and also eliminated rail-specific silos, consolidating ACH, wires, and real-time payments onto a single cloud-native platform. That shift is what enables both operational efficiency and business expansion. The bank’s CEO put it plainly: this is what allows them to grow their payment business and lower the cost of deposits. 

A recent American Banker webinar poll found that 84% of financial institutions believe the resilience of their current ACH and Fedwire infrastructure should be reassessed. That number isn’t surprising. What would be surprising is if nothing changes.

Phase 2 of Nacha’s new rules is approaching fast. There’s not enough runway to complete a migration before the deadline. But it’s enough time to make the decision and to start the kind of phased modernization that gets you to full retirement on a reasonable horizon.

Something will come after Phase 2.  Every new compliance mandate, standards update, or fraud-control requirement is harder on a mainframe. It becomes easier to implement on a unified, rail-agnostic platform that updates automatically and treats payments consistently across every rail, eliminating the need to manage separate systems for each network.

The industry modernized everything else. ACH got left behind because it was reliable and nobody wanted the risk.

Those reasons haven’t gone away. Successful banks will build a unified foundation for all money movement, where every rail, every asset , and every originating channel is orchestrated from a single platform. The cost of not doing that keeps going up.