ACH payments are electronic transactions from one bank to another that are processed through the Automated Clearing House network. ACH payments are commonly used for direct deposit of payroll, and online recurring payments of bills, mortgages, and loans.According to the National Automated Clearing House Association (NACHA), 23 billion payments were processed over the ACH network, moving over $51.2 trillion. This represents the sixth consecutive year that ACH payments value has risen by $1 trillion or more, year-over-year. The popularity of ACH transfers has to do with customer comfort level; as electronic payments become more common, more people choose ACH over other payment options. ACH payments also offer several benefits over different types of payment including paper checks, wire transfer, or EFT.
1. Lower Processing Costs
ACH transfers usually cost less than alternate forms of payment and are often the cheapest alternative to a cash transaction. Costs may vary depending on the ACH processor; some charge a flat fee per transaction, ranging from $0.25 to $0.; others charge .75 - 5 percent of the transaction value; some use a combination of per transaction and percent of transaction value.For comparison, there may be a $20 - $35 fee to the sender of a wire transfer, and an additional $10 - $20 fee charged to the receiver. Paper checks cost an estimated $1.22 for organizations to process including manpower and various other costs. With ACH payments, organizations can process a one-time or recurring ACH payment for less than the cost of processing checks or debit card, saving money typically spent on payment processing.
2. Faster Processing Time
In the past, ACH payments took 3-5 days to process. However, starting in 2016, a new regulation changed ACH processing from once per day to three times per day, making same-day ACH payments possible. ACH transactions became more popular as the network accepted same day transactions. In 2018 same-day ACH had an 83% increase over 2017 values and a 137% increase in volume.
Paper checks, on the other hand, can take 7-10 days to process. Wire transfers have guaranteed same-day processing, but high fees and the fact that they must be created and distributed on an individual basis make them impractical for regular use.
With faster processing times, late cutoffs, and same day ACH processing organizations using ACH payment processing can receive payments quicker to improve cash flow and maximize revenue.
Users must register to become part of the ACH network, providing usernames, passwords, bank details, and routing information. Moreover, NACHA requires that parties conducting an ACH transaction implement security measures to protect sensitive data. This includes data segmentation, encryption, and limiting access to customer information to reduce the risk of fraud and tampering.
In a recent study by J.P. Morgan ACH transfers were the safest form of payment processing. Payments most targeted for fraud were paper checks, followed by wire transfers and credit cards.
ACH payments are convenient for merchants, as well as for consumers. The ability to set up a recurring payment streamlines processes saves time and effort, and there are fewer miscommunications, errors, and work associated with non-payment required of payees.
With the right ACH payment processing partner, a company can take advantage of the many benefits of fast, low-cost ACH transactions. Some processing partners also offer additional features, including easily managed recurring transactions, cloud-based reporting capabilities, and late cut-off and Sunday processing. APIs are also available to integrate ACH payments with accounting and finance systems.
Payliance is an ACH payment processing partner that specializes in flexible payment and risk mitigation software solutions that help accelerate payments and lower processing costs. Our ACH processing solution makes it fast, easy and secure to process and control recurring and one-time payments and disbursements to streamline operations and save valuable time. With same day ACH, late cut off times and Sunday processing, organizations can receive funds as quickly as possible to maximize revenue.
Request a consultation with Payliance to begin quickly processing payments with ACH while minimizing processing costs.