Understanding ACH Payments: A Business Owners Guide March 2025

ACH Payments: The Basics

ACH payments- also known as ACH transfers- fall into two primary categories:

• ACH Debits: The business (payee) pulls funds from the customer’s (payer’s) bank account, typically with prior authorization. This is common for recurring bills or subscriptions.

• ACH Credits: The customer pushes funds to the business, such as paying a bill through their bank or initiating payroll direct deposits.

Each ACH transaction is further classified by a Standard Entry Class (SEC) code, which indicates the transaction type and authorization method. Common types include:

• Back Office Conversion (BOC): Converts checks from in-person purchases to ACH.

• Accounts Receivable Conversion (ARC): Converts mailed-in checks to ACH.

• Corporate Trade Exchange (CTX): Handles B2B payments, supporting multiple invoices.

• Cash Concentration or Disbursement (CCD): Used for internal cash management.

• International ACH Transaction (IAT): For cross-border payments.

• Point of Sale (POS): Initiated at retail terminals.

• Telephone Initiated Entry (TEL): Authorized via phone.

• Internet Initiated Entry (WEB): Authorized online.

ACH Processing: Speed, Cost, and Security

ACH payments are processed in batches, making them more cost-effective than wire transfers or credit cards. Most transactions settle within one to three business days, though same-day ACH is available for an additional fee and is subject to transaction limits. This batch approach reduces costs and operational errors, while automation streamlines reconciliation and minimizes manual intervention.

ACH payments also offer robust fraud prevention tools. Features like positive pay, account validation, and real-time exception handling help businesses reduce the risk of unauthorized transactions and comply with evolving regulatory requirements.

ACH vs. Wire Transfer and Direct Deposit

• ACH vs. Wire Transfer: Wire transfers are faster and suitable for urgent, high-value payments, but incur higher fees. ACH is preferred for routine, non-urgent, or recurring transactions due to its lower cost.

• ACH Debit vs. Direct Deposit: Both use the ACH network, but the direction of funds differs. ACH debits pull money from a customer’s account, while direct deposits push money into an account.

The March 2025 Update: ACH Growth and Modernization

The ACH network continues to experience robust growth. In 2024, the network processed 33.6 billion payments totaling $86.2 trillion, reflecting a 6.7% increase in volume and a 7.6% increase in value year-over-year. This surge is driven by the decline of paper checks, increased adoption of electronic payments, and the need for 24/7 processing.

Financial institutions are modernizing legacy ACH systems to keep pace. Solutions like Volante Technologies’ next-generation ACH platform enable banks to process higher volumes, deliver new services quickly, and ensure compliance with standards like ISO 20022. These platforms support advanced features such as smart payment routing, fraud detection, and seamless interoperability across payment types, which are critical for handling today’s ACH volumes and customer expectations.

Why ACH Matters for Small Businesses

For U.S. small businesses, ACH payments offer:

• Higher Retention: Bank account-based payments reduce involuntary churn from expired cards.

• Lower Costs: ACH bypasses expensive card networks, saving on transaction fees.

• Broad Accessibility: Any business or individual with a U.S. bank account can use ACH.

• Improved Security: Advanced fraud prevention and account validation tools protect against unauthorized transactions.

Conclusion

ACH payment processing is a cornerstone of modern business finance, offering efficiency, security, and cost savings. With rapid growth, the advent of AI, and the modernization of legacy systems, ACH is more powerful and adaptable than ever. Small businesses that stay informed and embrace these innovations will be best positioned to optimize cash flow, reduce costs, and deliver superior customer experiences in a competitive payments landscape.