Mortgage servicing has a payment “default” for a reason: Automated Clearing House (ACH) is familiar, widely adopted and low cost per transaction.
But it’s not always as simple as just “low cost.”
When we look closely at how mortgage payments occur in the real world — across borrower habits, exception handling, funding timelines and customer support — ACH can carry hidden costs that don’t show up in a per-transaction comparison.
That’s where debit cards come in.
Accepting debit card payments isn’t about replacing ACH. It’s about expanding payment choice in a way that improves payment certainty, reduces operational drag and better matches how borrowers (especially Millennials and Gen Z) manage cash flow and digital payments today.
Below, we’ll break down the “why now” behind debit acceptance: the overlooked economics of ACH, the behavior shift among younger borrowers and the operational upside servicers can capture with realtime authorization.
ACH looks efficient when you evaluate it by transaction cost alone. But mortgage servicers often carry additional burdens simply because ACH is not realtime.
One of the most frequently overlooked costs of ACH is the reserve balance many mortgage providers must maintain as a liquidity buffer, driven by reversals, processing delays and next-day funding requirements.
Those reserves represent idle capital: funds that could otherwise support investment, operational flexibility or strategic initiatives.
To make it real, here’s an example scenario: a mid-sized servicer processing $500 million in daily ACH volume could see an opportunity cost of roughly $550/day (about $17,000/month in lost interest income) based on a 1% reserve ratio and a 4% cost of funds.
That’s not a line-item expense. But it is a structural cost of “not knowing” in real time.
ACH transactions typically settle over one to three business days, and errors or reversals can extend that window.
When a borrower lacks sufficient funds, an ACH payment may take one to three business days to return an error. That delay slows resolution, increases follow-up effort and can contribute to borrower frustration, particularly when the borrower believes they paid on time.
In mortgage servicing environments already dealing with high call center volume, manual exception handling and limited realtime visibility, those delays can compound the operational load.
Mortgage payment behavior is changing because borrower financial habits are changing.
REPAY research suggests that as a growing share of younger borrowers enter the mortgage market, demand for flexible, convenient, digital-first payment options will keep rising.
And one key detail matters for servicers: ACH autopay is not universal.
Mortgage providers estimate that only about 56% of payments are made through ACH autopay, leaving a substantial share of payments made through manual entries or other methods.
That “other” category is where payment friction and operational cost often lives.
Younger borrowers are more likely to want payment timing that aligns closely with cash flow. Research indicates that better alignment of payments with cash flow is the most anticipated benefit of debit card payments among younger generations, and lenders note that younger borrowers tend to have less stable income and smaller cash buffers.
In practice, that means many borrowers want to control the exact day a payment is processed.
It also means autopay adoption is lower in these cohorts: Millennials and Gen Z report using autopay at a much lower rate, just 22% versus 41% for the rest of the population.
So if your strategy assumes “autopay solves it,” you’re likely leaving a meaningful portion of your borrower base in a manual-payment reality.
Borrowers don’t just want digital-first experiences. They already live in them.
REPAY research reports 67% of surveyed borrowers use digital wallets, and that number rises to 82% among younger generations.
Debit cards fit naturally into that behavior. They can be stored, tokenized and authenticated through mobile-first experiences, reducing friction for one-time or manual payments.
From a servicing standpoint, the biggest difference between ACH and debit is feedback speed rather than preference.
Debit card transactions are authorized instantly. When funds are insufficient, the payment is declined immediately and the borrower is notified in real time.
That single shift can create a cascading benefit:
This also connects to borrower emotion. When payment processing is delayed, borrowers report concerns about late fees, confusion about the delay, and frustration with the servicer’s payment process.
Modernization is both a technology issue and a trust issue.
ACH will remain a preferred option for many mortgage providers. But offering debit as an additional payment method can be a strategic complement both for borrowers who prefer manual payments and borrowers who want more control over payment timing and convenience.
REPAY research also found that when looking at younger generations, 42% of Millennials and Gen Z combined report currently using or previously using a debit card to make mortgage payments.
For servicers, adding debit helps address the pain points that often drive servicing costs:
At REPAY, we built our payments technology to meet borrowers where they are (online, in-app, by text or over the phone), so servicers can offer flexible, omni-channel payment options 24/7 without stitching together disconnected tools.
For mortgage teams, that translates into practical outcomes:
Modernization moves fast when it reduces complexity.
Mortgage payments are no longer just a back-office transaction. They’re a core part of the borrower experience and a meaningful driver of servicing efficiency.
When payment options match borrower realities — cash-flow timing, mobile-first behavior and digital wallet convenience — teams spend less time resolving avoidable issues and more time focusing on high-value work.
If you’re evaluating how to modernize payments this year, debit acceptance is one of the most direct ways to reduce uncertainty and meet borrowers where they already are.
Read the full research whitepaper here.
No. In most servicing environments, debit works best as a complement to ACH for borrowers who don’t use autopay or who want more control over payment timing.
Speed of feedback. Debit transactions are authorized in real time, so insufficient funds are typically identified immediately rather than days later, helping borrowers and servicers resolve issues faster.
Because ACH isn’t realtime, which can create downstream costs: processing delays, reversals/returns and the need for reserve balances that tie up capital.
Research suggests yes, especially among younger borrowers. REPAY survey findings indicate many borrowers use digital wallets (including younger cohorts at higher rates), and a sizable share of Millennials/Gen Z report using or having used debit for mortgage payments.
Because authorization happens in real time, borrowers can find out immediately if a payment won’t go through and take action sooner (for example, rescheduling or switching payment methods).
Because autopay adoption isn’t universal; providers estimate roughly 56% of all payments come through ACH autopay, and Millennials/Gen Z report using autopay at lower rates than older cohorts. Debit helps reduce friction for the “manual payment” segment.
Debit tends to shine in high-friction moments: one-time payments, payments close to the due date and situations where borrowers want precise control over timing.
Servicers should look for a partner that supports strong security practices (for example, PCI compliance, encryption/tokenization and fraud-mitigation controls) and can align to the organization’s compliance requirements.
It doesn’t have to. The goal should be enabling debit through a platform that supports integrations with servicing/LOS systems and simplifies reconciliation and visibility so teams aren’t forced into disconnected workflows.
Start with a simple assessment:
Then use those answers to model where realtime authorization could reduce friction and improve payment certainty.