ACH Processing is a service of the Automated Clearing House (ACH) network. The ACH is a financial network developed for member institutions to send debit and credit payments between one another electronically. Designed for low-value transactions, the ACH network can handle recurring or one-time payments. Similar to e-check processing, the payer in an ACH transaction begins the transaction while the payee authorizes the payment.
ACH payments are primarily used by larger institutions for their debits or credits. Consumers will recognize these transactions as what is used to make a payment towards a credit card or utility bill. When payroll transactions are made, most companies will use the ACH network to debit their employees.
The creation of ACH was seen as a way of replacing traditional checks with a paperless solution sent between member organizations. Managed by the National Automated Clearing House Association (NACHA), the rules and regulations are administered by the member institutions of the ACH network.
ACH Payment Processing
ACH payments are a relatively seamless process for businesses or customers looking to make paperless payments. To start the ACH process, the following information will need to be provided by the payer to the payee.
- Payer's financial institution's name
- Type of account held at the financial institution
- Financial institution's routing number
- Payer's account number
ACH payments can be made by both banks and credit unions. Once account information is confirmed by the Payee, debits can be sent (such as direct deposit payments) or credit can be accepted (such as utility bill payments) from the Payer's registered account. Many of the ACH transactions are focused around monthly bills, but accepting one time payments is also a viable option.
Through the Automated Clearing House, payments are initiated or requested by one party and confirmed by the other. Transactions are sent between member financial institutions through the centralized financial network, routing funds from the payer to the payee using both parties' information. Payments usually are sent 1 time per day and take a couple of days to be received into the payee's bank account.
The low cost, low risk nature of ACH transactions is the reason why over 100 million ACH transactions are handled through the network on a daily basis.
ACH Processing Time
ACH processing time typically takes 3-5 days. Settlement times can differ between banks depending on how fast they send ACH credits and how they handle ACH debits. Credit card payments will generally take 2 days from authorization to settlement at the merchant's bank. Most financial institutions will clear payments received through ACH in a shorter time period than that of paper checks deposited at the bank.
Starting in 2016, Same Day ACH was implemented to speed up the ACH payment time. With 3 different windows available for payments to be sent, the ACH credit process has become much faster. While payments sent will be done quickly, recipients will not necessarily have the same abilities. ACH debits are still held under a 2 day wait period so that payers have the option to stop transfers if needed. These new regulations can speed up the ACH time by half to one and a half days.
Benefits to ACH
Businesses that can use ACH processing services have realized that it can be one of the best alternatives for accepting payments.
- Lower Fees: Accepting credit or debit cards can cost merchants a discount fee on top of the transaction fee. Using ACH, merchants can avoid any discount fees and pay a single transaction, regardless of the size of the transaction.
- Convenience: Unlike accepting checks in the mail or in person, ACH is completely paperless. This can help reduce the hassle of managing paperwork or having to deposit each check received by payers.
- Automated: Merchants can set up customers to automatically make monthly payments with an ACH rebilling service. Without having to follow up with customers or accept their monthly payments, ACH will automate the process with billing on the same day every month.
Customers that have used ACH to either receive or make payments have a tendency to prefer it once they understand the process. Customer benefits include:
- Paperless: Controlling most payments through a computer or mobile app, customers do not need to physically send in payments. This reduces costs for customers without having to print checks or pay for postage when payments can be handled with no cost to them online.
- Automated: Similar to one of the reasons why merchants prefer ACH, setting up automated payments makes it much easier when customers do not have to remember to make monthly payments. This can help customers save money by avoiding any late payment or delinquent fees.
While many customers do prefer to make payments using their debit or credit cards, the use of ACH is still widespread. Customers are almost always familiar with the use of ACH since so many utilities, service providers, and payroll companies use it as their only means for payments.
High Risk ACH
Most payment processors do not have the ability to help higher risk businesses secure ACH processing services. ACH is an ideal solution for businesses that can experience trouble finding credit card processing or want an additional payment solution to offer customers.
Using a high risk ACH processing service will allow merchants to protect themselves from potentially fraudulent transactions that can curb the growth of a business. By pursuing an ACH solution, merchants can tap into a low-cost solution that's convenient for both customers and merchants alike.
Start Accepting ACH Today!
Partnering with Allied Payments provides merchants access to a low cost ACH solution for accepting payments. Used by many businesses as an alternative means for payment, it can help to significantly reduce the problems or hassles that come from billing customers with a credit or debit card.
Regardless of the type of business model, merchants are encouraged to reach out and speak to one of our ACH payment experts. We will be more than happy to go through the different options and pricing plans for businesses starting up their ACH services.