Last year, the ACH network processed financial transactions worth $61.9 trillion. These included direct deposit for employees, recurring consumer payments, and B2B payments such as paying vendors or suppliers. Whether using it for direct deposit or recurring payments, ACH credit is an efficient way to move funds from business bank accounts to customer accounts. Streamlined processes, lower transaction fees, and greater flexibility and security make it a great choice for your customers.
Cost
For businesses that run on a subscription model or bill their clients regularly, ACH payments can be a great way to streamline the billing process and ensure invoices get paid on time. In addition, it’s a lower-cost option compared to other electronic transaction methods, such as wire transfers and credit card processing, which can cost up to 2-3% per transaction. Whether you’re splitting the check for dinner or sending money to your landlord through a bank transfer, most of us have experienced ACH transactions in our daily lives. These swift, simple, and secure digital transactions reduce the chance of human error, which can result in expensive blunders.
Similarly, using ACH credit payroll deposits means you can avoid the potential for paper-related errors by moving funds directly into your employees’ bank accounts. It also saves your business money on fees for delivering physical checks or paying for postage, ink, and supplies. Depending on the payment processor you work with, they may charge a one-time fee to set up your ACH services. However, these fees are usually wrapped into a monthly service fee less expensive than the transaction costs associated with other payment options.
Flexibility
ACH transactions transfer funds directly between bank accounts, unlike eChecks or debit card payments that require conversion to physical money. It gives the payee the flexibility to use the funds however they wish. The ACH network is used for everything from employee direct deposits and recurring payments to mortgages and other large purchases. Using ACH to collect payments saves your customers money. They don’t need to spend extra on stamps or stationery when making a payment online, and there are typically no fees associated with sending or receiving an ACH transaction. The ACH network is being improved with new options that offer even more flexibility. Same-day ACH is an option that allows RDFIs to make credits (like payroll direct deposits) and debits available faster than the typical 23-hour processing window. Businesses can benefit from the same-day processing of ACH credit and debit payments and increased transaction limits.
Security
The ACH network is a system of United States financial institutions that uses electronic transfers to move funds from one bank account to another. ACH payments are a secure, reliable way for consumers and businesses to pay and get paid. Unlike credit card transactions, which often include customers’ sensitive personal information, ACH transactions are limited to bank accounts and routing numbers only. It reduces the chance of fraudulent activity and allows high security for all parties involved in an ACH payment. Consumers use ACH to make their electric bills, cable and internet payments and mortgage payments online. These recurring ACH debits are more convenient than remembering to write and mail checks each month.
For businesses, ACH offers a lower-cost alternative to credit cards. It costs, on average, $4-20 USD to process a check (including printing, mailing and accounting team time), but it only takes a fraction of that to process an ACH payment. That savings translates into significant reductions in transaction fees, processing time and the incidence of human error that can happen when handling paper checks.
Reliability
ACH transactions are bank-to-bank transfers, which work the same way checks do. The ACH network handles direct deposit of payroll and government benefits, mortgage and bill payments, and business-to-business invoice payments. When an ACH transaction occurs, the bank that processes the transaction (the ODFI) communicates with your company’s bank (the RDFI), asking for the funds to be moved from your customer’s account to yours. The transaction is completed if sufficient funds are available and the money is transferred. Unlike credit cards, which typically charge 2% for each transaction, ACH payments only average $0.29. That makes ACH payments a more affordable option for businesses of all sizes. And since consumers have been moving away from check payments during the COVID-19 pandemic, adding ACH as one of your payment options is an excellent way to save customers time and money while increasing your business’s revenue.
Convenience
When people make payments online, they typically do so with a credit card or an electronic check. But, ACH processing is another option that allows customers to pay for goods or services with their checking account. While many people associate ACH with direct deposit and using payment apps, it’s also an extremely popular option for paying bills and making payments between businesses and consumers. A paycheck is an ACH transaction when the employer sends a direct deposit each pay period.
Additionally, ACH transactions are commonly used for B2C payments such as mortgages, insurance premiums, utility bills and club membership fees. And compared to checks and credit cards, ACH transfers are much cheaper to process for businesses of all sizes. Offering this payment option could mean lower business transaction costs and a better customer experience. Ultimately, this can result in higher customer loyalty and retention.
