Should you start accepting ACH payments for your business? The reasons to use ACH processing are going to depend on what type of business you have. If your business relies heavily on online payments, or you have recurring online billing, then ACH may be your best option.
What is ACH?
Automated Clearing House (ACH) is an electronic network that processes large amounts of credit and debit transfers for institutions nationwide. ACH Processing is a rapidly growing alternative to credit card processing, and it handles around $40 trillion worth of transactions each year.
ACH rates are significantly lower than card processing, which results in savings on payment processing costs, while helping reduce fraud and chargebacks to your business’s bank account.
ACH runs on a framework called the Automated Clearing House Network (ACH Network). This framework provides the necessary processes to move money from one bank account to another, through Direct Deposit and Direct Payment via ACH transactions.
The History of ACH
ACH Processing is governed by the National Automated Clearing House Association (NACHA). The foundations of the network were set in 1974 wherein several ACH associations formed NACHA. Over the past three decades, the NACHA framework was further developed through the advancement of technology, and it paved the way to implement internet and telephone-initiated payments in 2001, and international payments in 2009.
For 40 years, NACHA – The Electronic Payments Association, has acted as the trustee of the ACH Network, managing the development and administration for the financial network that moves more than 20 percent of all electronic payments each year.
ACH payments continue to experience a steady growth, and NACHA released a review of the Q3 2015 results. The numbers show a considerable increase in the ACH transaction volume compared to the previous year. This shows that the methods put into place by the association, particularly its comprehensive risk management strategy and clear rules and regulations, are successful in creating a safe and predictable business environment.
How the ACH Network and ACH Payments Work?
ACH payment starts in the exchange between an Originating Depository Financial Institution (ODFI) – which can be a single person, a corporation, or another entity – and a Receiving Depository Financial Institution (RDFI). The ODFI will enter an ACH entry, and an entire batch of transactions will be submitted at specific intervals to an ACH Operator – the two central clearing facilities: The Federal Reserve or The Clearing House. Then, it is carried out by the ACH Operator that will assign the transactions to the correct RDFI.
Are ACH Payments Widely Used?
Accepting ACH Payments have become more popular with the rise of automated online payments and recurring billing. In fact, the ACH Network supports more than 20 percent of all electronic payments in the US. You have most likely used it in the past. Some common uses of ACH Payments include:
Direct Deposit of payroll, Social Security and other government benefits, and tax refunds
Direct Payment (or direct-debits) of consumer bills such as loans, utility bills and insurance premiums
Electronic Checks (eChecks)
Federal, state and local tax payments
What Are The Benefits Of ACH Processing For Your Business And Customers?
PEACE OF MIND – With ACH, you can save time going to the bank, and lessen the risks of sending paper checks.
BETTER CASH FLOW – Increase your sales by giving your customers more ways to pay your business.
RECEIVE FUNDS SOONER – ACH payments are deposited faster than traditional check processing.
LOW PROCESSING FEES – ACH processing rates are significantly lower than card payments fees.
DECREASE ERRORS AND FRAUD – Potential errors and fraud are reduced due to less people handling the transaction.
SAFETY OF PAYMENTS – ACH Network is one of the largest, safest, and most reliable payment systems.
RECURRING BILLING PAYMENTS – If your business offers memberships or subscriptions that require your customers to be charged monthly or at particular regular intervals, you can arrange for funds to be deducted from your customer’s account and be deposited to your business.
Industries that Could Get Maximum Gains from ACH Processing
Technological advances have made ACH payment processing more popular than ever. These industries include medical care, hospitality, health clubs, day care services, home cleaning, and bookkeeping, to name a few – where hassle-free service is of utmost importance. These industries are likely to gain most from ACH processing.
Businesses that sell online can also accept ACH payments, by enabling your customers to quickly and securely enter their checking account information, allowing you to process a one-time or recurring payment. ACH is also great for mail order sales and telephone sales.
Also, industries that have a monthly recurring billing system like real estate, property management, loan payments, bills collection, and online monthly subscription-based models would greatly benefit from ACH processing.
Our experts have extensive experience working with, and getting approval for, ACH accounts for a wide variety of industries. GFC Financial understands how important your cash flow is, and how ACH Payment accounts can significantly improve the efficiency of your business.
Talk to us now to find out how you can start accepting ACH Payment Processing for your business.