Electronic payments through the Automated Clearing House (ACH) network continue to soar. In 2013, consumers and businesses transferred $38.7 trillion across 22 billion separate ACH transactions.
It's easy to understand the growing popularity of ACH payments. These electronic transactions are faster than traditional paper-based checks, and more environmentally friendly, too. And billers prefer them, too: According to NACHA – The Electronic Payments Association, billers prefer receiving ACH payments rathern than credit cards 48 percent to 21 percent.
However, consumers and merchants don't always agree on how best to use ACH payments. Consumers typically prefer one-time ACH payments, according to NACHA, while billers tend to prefer recurring ACH payments.
Why Recurring ACH Payments Are a Sticking Point
Recurring ACH payments may be the preference of merchants, but consumers favor one-time payments. It boils down to this:
- One-time ACH payments provide consumers with much greater control.
- Recurring ACH payments allow billers to manage risk and decrease spending.
Businesses prefer recurring billing since it reduces payment tardiness. Your company can still receive regular payments, even when your customers are away on vacation. Recurring billing also reduces paperwork and other overhead expenses since you only have to set up the system one time for each user.
On the other hand, consumers prefer the flexibility and control of one-time payments. When all future transactions happen on autopilot, it becomes harder for shoppers to manage their spending and check for occasional invoice errors.
Making ACH Payments Work for Merchants and Consumers Alike
With $38.7 trillion in transactions (and growing), it is unlikely ACH payment processing will go away anytime soon. Merchants can take steps to make recurring ACH payment more appealing to consumers. NACHA provides useful resources here to help you educate your customers about direct payment.