Here’s How ACH Helps You Cut Costs, Save Time & Increase Revenue
When it comes to payment processing, both enterprises and consumers like having options. For businesses, it means access to more shoppers and recurring payments, while for customers it means more flexibility and convenience. Today, instead of relying on traditional payment and transaction solutions, merchants prefer using secure, more flexible and cost-efficient payment systems. One such payment platform that has been getting a lot of attention lately is ACH payment processing. If you’re not familiar with the term and don’t know much about how it benefits your organization, then let us demystify the process of ACH payments for you.
What is ACH Processing?
Before highlighting the advantages, it’s important to know what ACH exactly means and what it does. So, without further ado, let’s get on with it.
The concept of Automated Clearing House (ACH) isn’t new; it has been around for more than 40 years and has gained significant traction among today’s merchants (for good reason). Being a business proprietor, if you’re paying your employees via direct deposits, then you’re already utilizing ACH payments.
Automated Clearing House payment processing is a federally regulated network that processes large volumes of financial transactions (both credit and debit) between banks using a unique routing number (located at the bottom of paper checks). Once the transaction is initiated, the money is debited from the buyer’s bank account and credited to the merchant’s account. It functions just like a paper check, but is simpler and faster, and requires fewer manual steps.
Some Interesting Facts About ACH
- Since its inception back in 1974, the ACH network has grown into one of the largest, safest, and most efficient payment systems in the world.
- According to NACHA, the use of ACH payment processing has been steadily increasing over the last few years. The NACHA, formerly known as the National Automated Clearing House Association, is a not-for-profit trade association that manages the development, administration, and governance of the Automated Clearing House Network in the United States.
- From 2013 to 2016, the total volume of ACH network transactions increased to more than 25 Billion payments and $43 Trillion in value.
- It processes two different types of transactions –Direct Deposits and Direct Payments. Direct Deposits include payroll funds, employee expense reimbursement, credit payments from a company to consumer, government benefits, tax and other refunds, as well as any annuities or interest payments. On the other hand, Direct Payments can be used by both organizations as well as individuals to make either an ACH Credit or ACH Debit payment.
- Unlike paper checks, Automated Clearing House transactions are electronically transmitted.
- ACH payments and moving and growing even faster. Currently, around 43 percent of Financial Institutions (FIs) offer Same-Day ACH (SDA) credit origination to businesses, and it is expected to increase to 75 percent by the end of 2018.
- Two-thirds of FIs (i.e. around 66.7 percent) are already making same-day ACH (SDA) funds available by 5 PM local time.
- There’s a prediction that the percentage of Financial Institutions (FIs) allowing consumers to push SDA credit payments, for both Person-to-Person (P2P) applications and Bill Pay will grow to 25 percent in the closing months of 2018.
- Presently, around twenty-five percent of FIs do not offer SDA origination to business customers because their core processor or software vendor have not yet enabled the service.
Why Use ACH Payment Processing for Your Business?
Here are some of the top reasons why today’s tech-savvy businesses are embracing Automated Clearing House as a primary payment processing option:
It’s Fast (And Getting Faster)
Transferring payments from one bank account to another usually takes 2 to 3 working days. However, NACHA has come up with a three-phase roll-out, which will lead to same-day ACH (SDA) processing for businesses very soon. On September 15, 2017, the SDA payments became available for debit entries. From March 16, 2018 onwards, Financial Institutions (FIs) will be authorized to make all Automated Clearing House transactions (such as payroll Direct Deposits) available the same day by 5:00 PM (according to the bank’s local time).
One of the biggest advantages of ACH payment processingis its low processing fees as compared to other payment methods such as checks or credit cards, which can cost you a fee of somewhere between 1 percent and 4 percent. On average, it costs $1.22 in supplies, workforce, and subsidiary costs to process a paper check. However, the same payment can be processed using Automated Clearing House for a fraction of that cost.
The reason why ACH payments have lower error rates, fraud risk, and transaction costs is the fact that they are processed in batches. Instead of signing checks, placing them in envelopes, paying for postage as well as labor to deliver them to delivery centers, ACH instantly and electronically deposits payments in receivers’ bank account, thus saving you time, money, and resources.
Here’s a rough estimate of how much fees you’ll be paying for standard payment options based on a $250 purchase:
- Credit Card: $4.95
- Paper Check: $1.22
- ACH: $0.22
Note: The fees may vary depending on the type of your payment processing provider, but this example will give you a rough idea of what to expect.
Unlike traditional paper check payments, ACH payments are much safer and secure. As funds are electronically transferred into the recipient’s bank account, they can’t be lost, stolen or misplaced. According to the Federal Trade Commission, around 9 million Americans suffer at the hands of identity thieves every year. The primary cause of identity theft is the ease with which the financial information can be potentially obtained from paper checks, bank statements, and credit card bills, which are not properly disposed of by consumers. This is where ACH payments come in handy and mitigate the risk of identity theft associated with outmoded paper checks.
Get Started today
To conclude, Automated Clearing House is an incredibly reliable, secure, and cost-effective method to process payments, disbursements, deposits, and credits. ACH payment processing saves your company both time and money by lowering its overall costs, improving cash flow, increasing security, and offering better flexibility for your accounting staff. In addition to that, it also helps you make environment-friendly business decisions that ultimately help your bottom line too.
So, what are you waiting for? Stop receiving payments the old-fashioned & expensive way, and take advantage of ACH payment processing. If you’re interested in learning more about ACH, then get in contact with us @ (877)720-0033.