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How Do ACH Payments Benefit Your Business?

Before we delve deeper, let’s start with the basics.

What Does ACH Stand For?

ACH stands for Automated Clearing House, and payments made over the ACH network are known as ACH payments. ACH Payments are the transfer of money between two bank accounts.

ACH transactions refer to electronic fund transfers between banks and credit unions that are processed through the Automated Clearing House (ACH) network. This network facilitates various transactions, such as direct deposits for paychecks and automatic payments for regular bills.

The ACH network has seen tremendous growth, especially since 2019. Overall, ACH Network payment volume rose 6.7% from 2023 to 2024, to 33.6 billion payments in 2024. The value of those payments was $86.2 trillion, an increase of 7.6%

ACH payment growth chart -2015-2024

Source NACHA

What is an ACH Payment?

While not everyone knows the term ACH, many are familiar with getting their paychecks through direct deposit into their bank accounts.

However, ACH payments go far beyond paychecks. Here are the common types of ACH transactions:

Common ACH Transaction Types

  1. Direct Deposits
  2. Automatic Bill Payments
  3. Business Payroll Transfers
  4. Tax Refunds
  5. Social Security Benefit Distributions

How ACH Payments Work – ACH Payment Process

How it Works:

  1. Initiation: The process starts when someone wants to pay or deposit. They provide their bank with the necessary information (account numbers, routing numbers, amounts).
  2. Batching: The bank gathers these transaction requests and groups them into batches.
  3. Processing: These batches are sent to an ACH network that acts as a clearing house.
  4. Distribution: The ACH network sorts the transactions and sends them to the receiving banks.
  5. Settlement: The receiving banks then credit or debit the appropriate accounts.

Seven Business Benefits of ACH Payments

ACH payments offer numerous benefits for businesses. Here are seven key benefits:

1. Lower fees

Merchants and organizations that accept card payments often encounter processing fees. Every debit and credit card sale incurs these fees. The fees are typically higher for cards that provide cashback or travel rewards, as well as for online transactions. In contrast, the costs associated with ACH payments are significantly lower than those for credit cards.

Processing Cost Comparison

Credit and debit cards have the highest fees compared to paper checks and ACH payments.

Debit and credit card fees typically vary depending on the transaction amount. These charges may fluctuate based on the card type and the location of the transaction it.

Paper checks have low transaction costs; however, they can incur higher overall expenses due to the manual effort required.

In comparison, ACH payments are the least expensive payment method.

Switching to ACH payments can help businesses save money on payment processing costs.

2. Security

According to the American Bankers Association, Check fraud accounted for forty-seven (47) percent of annual deposit account losses pre-pandemic — equating to a more than $22 billion hit. Further, AFP Payments Fraud and Control Survey found paper checks accounted for sixty-six (66%) of all attempt/actual payment fraud in 2021. When a customer pays by paper check sent through the mail, several ways can compromise the check along the way.

First, the customer can lose the check going to mail it, or the post office could lose the check handling it.

Second, several different entities handle that check during processing, which makes it susceptible to signature forgery or tampering.

Checks expose account details including the account number, routing number, and the account holder’s name, phone number, and address. Which poses a genuine risk of identity theft.

Other common types of check fraud include. Check forgery, chemical alteration, paper hanging, and check floating.

When the customer’s check finally does arrive at the business, the risks continue.

Relying on paper records and invoices increases the likelihood of fraud and errors. It can also expose your business to the risk of non-compliance with PCI regulations.

Merchants need to follow PCI rules to keep accepting credit card payments.

ACH can reduce the risks of keeping checks before depositing them. This includes the dangers of taking checks to the bank, losing them, or having them stolen.

Overall, ACH payments are safer than paper checks.

Also, offering more payment options makes customers happier. It helps keep them from choosing a competitor.

3. Convenience

ACH payments eliminate the need for customers to carry checkbooks or send paper checks in the mail.

Customers want the option to make a one-time payment or to set up regular payments using ACH.

ACH payments are sent electronically. This helps merchants avoid risks from paper checks. They also save money on postage, ink, transport, and labor.

4. Risk reduction and time savings

ACH payments save merchants time and eliminate risk and trips to the bank.

ACH payments are shown in reports in today’s payment systems. This makes it easier to balance accounts and lowers the chances of late payments.

For example, it prevents issues when someone forgets to mail a check. Overall, this saves time. They also need less time to process, reduce the chance of mistakes, and shorten the time needed to fix any errors. Plus, they save money by avoiding the need to send paper invoices.

5. Recurring billing

ACH payments are an excellent choice for businesses that have regular customer payments or subscriptions.

As a business owner who bills customers often, you must consider a few things.

Firstly, each transaction comes with a cost. If the number of transactions and processing expenses goes up, the total costs can increase significantly.

Payment processing costs affect margins when a merchant’s payment mix comprises mainly credit cards or online sales. Interchange rates are higher for transactions made with rewards cards and online sales due to the higher risk of fraud.

Second, your customers may forget or pay their bills late, resulting in unpaid invoices and cash flow issues.

Third, there are manual steps and risks associated with using paper checks. Fourth, consider the costs typically connected to credit cards commonly used for regular billing.

ACH payment processing fees are low, helping merchants reduce their costs on each transaction. Over time, these savings per transaction can add up, significantly affecting the merchant’s margins.

6. Faster processing time

Unlike a mailed paper check, which must go through the mail, an ACH payment is paid online, speeding deposits.

Banks prefer ACH payments over paper checks. This means a bank will handle an ACH payment first before a paper check. This means merchant funds are deposited more quickly through ACH than with a regular check.

7. Consumers prefer ACH over paper checks

Finally, consumers favor ACH payments over paper checks. The 2019 Federal Reserve Payments Study indicates that the use of paper checks has significantly declined. In 2000, 40 billion checks were used, but by 2018, that number dropped to under 20 billion. Additionally, the number of checks written decreases by 1.8 billion each year. If this trend continues, checks could vanish by 2026, according to a report.

Payment Trends

It makes sense that consumers prefer ACH over traditional paper checks. There are no checks to order, buy, write out, and mail. Also, the automatic billing feature of ACH payments helps people remember to pay their bills each month. This is the main reason for late or missed payments.

Since ACH payments are safe electronic transactions, customers may feel more comfortable paying. This can make them more likely to buy when they have different payment options.

ACH payments benefit both merchants and their customers. They enable businesses and customers to save time and money while reducing the risk of identity theft and fraud.

ACH, recurring payments, and IntelliPay

IntelliPay enables businesses to accept one-time and recurring ACH payments in various ways. They provide both standalone options and integrated solutions.

Additionally, for the 63 million unbanked or underbanked Americans, we provide eCash for online cash payments. For more information about IntelliPay payment options, contact our experts at sales@intellipay.com.