The Automated Clearing House (ACH) network is a federally regulated interbank system for sending and receiving electronic payments. Companies use the ACH network for everything from bill payments to direct deposits to eChecks.
Though if you already accept credit card payments in your business, you can already "electronically" receive money from customers.
What are the main pros of using the ACH network?
The Benefits of ACH Payments
The most important advantage of ACH payments is cost. Whereas credit card processing carries fees ranging from 1 percent to 4 percent, ACH transfers are considerably cheaper since transactions are batched to keep expenses low. Transactional costs are usually measured in pennies.
However, there are other benefits, including:
1. Faster Processing
ACH transfers used to offer next-day settlements, but there now exist same-day balance transfers in the United States. Some countries even offer multiple settlements throughout each 24-hour cycle.
By contrast, credit card payments can sometimes take several days to completely clear.
2. Recurring Billing
It's possible to set up recurring payments with credit cards, but the ACH network was specifically designed for this purpose. This is why so many employers use ACH for direct deposit.
3. Wider Reach
Although most shoppers have a bank account of some sort, not everyone uses consumer credit cards. This is especially true of millennials, 63 percent of whom avoid credit cards altogether. By enabling ACH payments, you're able to tap into this lucrative demographic.
The same is true of paper-based checks, which are also on the decline. ACH payments are an attractive digital alternative for those who enjoy shopping online.
Are there any disadvantages to accepting ACH payments?
The Downsides of ACH Payment Processing
The ACH network is regulated by the federal government and managed by the National Automated Clearing House Association (NACHA). However, ACH payments don't have to follow the same PCI guidelines that credit card processing does.
Yet merchants are still responsible for keeping their customers' financial data safe. In fact, ACH security is arguably more important since merchants have direct access to bank accounts and routing numbers.
Another consideration is customer education.
Many Americans are familiar with direct deposit, but they may be uncomfortable sending or receiving electronic payments when shopping. Not everyone wants to provide direct access to their bank accounts.
As a merchant, you'll need to raise awareness of your ACH offerings and help familiarize your users with the benefits and security features available. This education requires time and money. However, given the potential savings you'll enjoy by moving customers away from credit card processing and toward ACH payments, the investment may be worth it.
Do ACH Payments Make Sense for Your Business?
Every company is unique, and there is no universal payment solution for all businesses, but in most cases, accepting ACH payments offers more benefits than disadvantages:
- Getting started is easy.
- You can potentially reduce credit card fees.
- You can reach a much wider audience.
To learn more about BluePay's approach to ACH payments, contact our customer support team today.