Checks, Wires, ACH or Realtime: Why Your Disbursement Methods Matters More Than You Think

A commercial lending team at a regional bank was processing construction draw disbursements the way they always had: checks for subcontractors under $5,000, wires for everything else. When they finally calculated the actual cost—staff time, wire fees, check printing, reconciliation—they were spending nearly $15,000 annually on payment processing alone for just 800 transactions.

The kicker? Most of their payees would have accepted ACH, Zelle or Direct Debit.

The Real Cost of Paper in a Digital World

Most banks know the direct cost of checks: $4-6 for check stock, printing, envelopes, and postage. What's less visible is everything else.

Staff time to print checks, verify amounts, prepare for signatures, and file documentation adds another $3-5 per transaction. Exception handling when checks get lost. Reconciliation time to match cleared checks against disbursement records. The delay between mailing a check and when it clears, during which you're carrying balances that could be returned to borrowers.

One commercial lender calculated their true cost per check at $11 once they accounted for the full operational lifecycle. At 600 escrow disbursements per year, that's $6,600 annually just for checks.

Wires are worse. Most banks charge $25-40 per outgoing wire, plus staff time to verify account details and obtain approvals. If you're using wires for construction draws or commercial real estate closings because they feel "more professional," you're paying premium pricing for transactions that don't require same-day settlement.

ACH transfers cost 20-50 cents per transaction. And unlike checks, ACH creates an electronic audit trail, processes faster, and fails less frequently.

The "That's How We've Always Done It" Tax

Every institution has legacy processes that persist not because they're optimal, but because changing them feels harder than maintaining them.

The typical justification: "Contractors and title companies are used to receiving checks. We don't want to create confusion by switching methods."

The other common objection: "Our core system makes it easy to print checks but harder to initiate electronic payments."

This is the "that's how we've always done it" tax in action. You've optimized your workflow around an expensive payment method because the system makes the expensive thing easy and the cheap thing hard.

Routing Logic

The optimal disbursement method isn't uniform across all transactions. It varies based on context:

For construction draws: Electronic disbursement should be default for general contractors and major subcontractors. Most accept electronic payments and the draw timeline rarely requires same-day settlement. Reserve wires for genuinely urgent situations.

For commercial real estate: Multiple parties need payment simultaneously—sellers, brokers, municipalities for transfer taxes. Routing logic might say: ACH for any payee over $1,000 who accepts it, checks only when required, wires only for same-day requirements over $50,000 or when finality of payment is required.

This routing logic doesn't require a new core system. It requires a layer that sits between "we need to disburse $45,000 to three contractors" and "execute payments." 

Platforms like Hudson do this—they read the payment requirements, check payee preferences, apply your routing rules, and execute.

What Happens When You Get It Right

A community bank with a commercial real estate lending division was processing about 10,000 disbursements annually for construction projects and CRE closings. Their breakdown:

• 6,000 checks at $10 average cost = $60,000
• 3,500 wires at $35 average cost = $122,500
• 500 ACH at $0.40 average cost = $200
• Total annual disbursement cost: $182,700

They implemented intelligent routing with a simple rule: Use ACH for any commercial payee that accepts it. Use checks only when required. Use wires only for same-day urgent payments over $50,000.

After implementation, their breakdown changed to:

• 2,250 checks at $10 average cost = $22,500
• 1,000 wires at $35 average cost = $35,000
• 6,750 ACH at $0.40 average cost = $2,700
• Total annual disbursement cost: $60,200

That's over $120,000 in annual savings without changing their core banking system or overhauling their processes.

But cost savings weren't the most valuable outcome. Because ACH transactions process faster and create electronic confirmations, their reconciliation time dropped significantly. Plus, error rates dropped because electronic payments eliminate manual data entry.

The Compliance Angle Nobody Talks About

If you need to prove to a regulator that a construction draw payment was made on time, to the correct contractor, in the correct amount, how quickly can you produce that documentation?

With checks: you're looking at the check register, the bank statement showing when it cleared (weeks later), potentially a copy of the cancelled check, and maybe confirmation the payee received it. That's multiple systems and manual assembly.

With wires: better immediate confirmation, but wires generate their own documentation burden—approval records, verification steps, confirmation receipts.

With ACH: the audit trail is automatic and electronic. The payment is initiated, processed, and confirmed within days. The complete record—amount, payee, date, confirmation—exists in one system and can be pulled instantly.

The Real Question

So why are so many institutions still running check-heavy operations?

Because change requires someone to champion it, and escrow operations rarely get executive attention until something goes wrong. It's not a crisis, so it's not a priority.