Since the 1970s, Automated Clearing House (ACH) payments have provided an efficient means of electronically moving money between banks for private and commercial use.
With ACH, consumers give businesses their necessary account details, empowering businesses to efficiently debit their customers. This then creates an effective banking channel.
Types of ACH
ACH payments are typically split between two primary categories: direct deposits and direct payments.
- A direct deposit is an all encompassing payment that covers any form of deposit transfers made from businesses or governments to a consumer, such as a government benefit payment for example.
- A direct payment covers any funds required to make a payment. Such as someone making a payment for goods at the grocery store, or buying furniture from a department store, where the funds are directly debited from their account.
Both are of equal importance when it comes to understanding ACH payments; however, there are other notable means of transferring money via ACH.
- ACH credits happen when money is essentially pushed from one account fund to another. An example of this type of transfer, would be an individual or business establishing payments with their bank in order to finance a recurring bill.
- ACH debits are where funds are “pulled” from an account; however, there are various separate kinds of ACH debits including: BOC, ARC, and CTX. Examples would be recurring payments or standing orders with a bank, or with Back Office Conversion (BOC), when a consumer purchases a car via check, the transaction is then converted into an electronic ACH payment.
How popular is ACH now?
With approximately 8.2 billion payments being made over a four month period when ACH payments were able to be same-day via a digital platform according to Payline Data, the demand for more efficient and secure means of paying and getting paid is undeniable.
ACH is often the underdog of the financial world in comparison to the vast availability of virtual cards, but it is still widely used by traditional institutions. The value of ACH transactions in 2019 grew more by $1 trillion for the seventh year running with a transaction increase of more than $1 billion according to Digital Transactions.
Companies such as Synapse offer white labelled products such as ACH that have the capability to transform the financial services that your business offers its customers by connecting to existing ACH accounts.
Benefits of ACH payments
ACH provides a higher level of efficiency and flexibility often including alternative or non-digital payment methods. Yet, there are also other significant benefits.
- The ease of accessing and signing up to ACH payments for consumers provides a higher level of security and convenience, as ACH is not reliant on personal details.
- The faster transfer period means that ACH payments can be processed within 72 hours and retains a low labor and resource cost over alternatives such as checks.
- Easy integration with loyalty programs, potentially increasing consumer retention.
- Provides both businesses and consumers with more control over spending.
- ACH provides a flat rate fee of $0.50, making it more cost efficient.
Why your business needs ACH
If your fintech requires an alternative and secure payment service - then ACH is for you.
Synapse offers a full suite of Banking as a Service (BaaS) products for B2B and B2B2C companies, empowering them to become financial partners to their customers. With options such as regular and same-day ACH payments, each supporting both debit and credit transfers, your business will have the flexibility it needs to build effective payment solutions for your customers.
References:
https://gocardless.com/guides/ach/types-of-ach-transfer/
https://gocardless.com/guides/ach/what-is-an-ach-payment/
https://www.finsync.com/blog/how-ach-payments-can-benefit-your-small-business/
