Navigating ACH Payment Rails
More Businessess are Riding the ACH Rails
Businesses aiming to optimize their payment method mix have undoubtedly explored ACH among their expansion options. In this article, Everyware takes you on the ACH railway journey, highlighting bank funds transfers as an alternative to the ever-popular card payment method. We'll explore the unique advantages that ACH payments bring to various types of businesses. And we'll show how Everyware merchants in particular, benefit from the innovative fusion of verified ACH transactions and text messaging, the express route to accelerating business operations along the increasingly popular ACH payment rails.
First, let's take a moment to revisit the definition of ACH. ACH is short for 'Automated Clearing House.' Governed by NACHA, ACH is essentially an electronic funds transfer (EFT) system designed to enable the movement of funds between US bank accounts.
ACH is Going Strong
Since 2020, consumers have shifted more toward online and remote payments. Digital bank transfers are more commonly used now beyond consumer auto-billpay and payroll direct deposits, though these are still the scenarios in which ACH-based money movement are seen most. Even with new tracks being laid with the introduction of Real-Time-Payments, Nacha reports that in 2022 $9.49 trillion in consumer bill payments and $13.67 trillian in direct deposits were made over ACH rails.
ACH vs. Card Payment Benefits Galore
While credit and debit card payments continue to reign as the most popular payment method among consumers, ACH payments have gained traction for several reasons.
One of the standout advantages of ACH payments is enhanced security compared to card payments. ACH transactions often involve robust fraud prevention measures, including stringent authentication of both parties involved in the transaction. Card payments can be more susceptible to unauthorized use as they rely on cardholder data alone. Unfortunately card skimming and data breaches do happen in spite of PCI DSS compliance.
Fewer Declines and Reversals
Merchants may worry less about ACH payment declines or reversals, which can be common with credit card transactions. The process for disputing ACH payments is often more extensive and requires strong evidence. Cardholders have more straightforward dispute processes for card payments, making it easier to dispute and reverse unauthorized or incorrect charges. While this can be consumer-friendly, it can also be exploited by fraudsters.
Scale and Efficiency
ACH payments are a no-brainer for businesses with a large customer base or a high volume of recurring transactions. They can be processed efficiently and reliably in batches, saving time and resources. They can be used for various billing models, including fixed monthly subscriptions, variable usage-based charges, and one-time payments. This flexibility is essential for businesses with diverse pricing structures.
ACH processing fees are typically lower than those associated with card payments. Add the savings from potential card chargeback, extra card processing fees, card update overhead expenses, and bank transfers prove to be a very cost-effective choice for businesses.
Why the Wait? ACH Payment Setup & Settlement Timing
Making a card payment is fast
Cardholders simply provide their credit or debit card number, expiration date, and a security code so verification is nearly instant and validated card payments can be immediately approved.
Making a standard ACH payment is not as fast (but is getting faster)
Traditionally, customers who want to pay by bank transfer will provide their bank routing and account numbers and then must complete a Microdeposit account verification. This method involves sending small trial deposits of a few cents to the customer's bank account over one to two business days. The customer must check their bank statement, verify the amounts of the microdeposits, and report them back to the business.
Thankfully, companies like Everyware offer integrated Instant Account Verification technology for faster automatic account setup and near-instant verification, which is crucial for businesses seeking a seamless onboarding process for customers.
Same Day ACH payments can settle even faster, down to just one day rather than the typical three day wait.
ACH payments take more time to settle
ACH payments can take several days to fully settle for a handful of reasons.
- They are typically processed in batches, not in real-time. Batches gather throughout the day and are transmitted to the ACH network on a schedule. Transactions initated later in the day might not process until the following day. And batches don't settle on weekends or bank holidays.
- They must clear a series of stages including origination (initiation by the sender), submission to the ACH network, clearing (verification of funds and account balances), and settlement (the actual transfer of funds between financial institutions).
- They are subject to risk management measures and regulatory compliance requirements like anti-money laundering (AML) and know-your-customer (KYC) checks, which can prolong the settlement process.
- Some financial institutions require settlement holds to ensure the availability of funds and mitigate the risk of fraud or insufficient funds.
How Everyware Seamlessly Integrates ACH Payments with Secure Text Messaging
Everyware merchants gain advantages from a range of essential ACH payment capabilities:
- Available Balance Threshold Controls: Merchants can dictate available funds thresholds to prevent insufficient fund issues. Most elect to require 50% over the Amount Due as a rule, but merchants in higher risk industries set higher available balance thresholds.
- Instant Account Verification (IAV): Seamless verification of customer bank accounts so they can select the ACH/Bank Transfer payment option and connect to their verified bank account in seconds.
- Real-time Balance Checks: Ensures sufficient funds are available before payment completion. If a consumer's account lacks sufficient funds at checkout they'll need to provide an alternative payment method or connect a different bank account. Not to worry; Everyware supports multiple payment method alternatives including card, digital wallet and pay-over-time plans.
- ACH Automated Text Messages: Everyware's (optional) text message communication throughout the ACH payment experience keeps customers informed about their transactions, payment confirmations, and upcoming deductions. Merchants can customize, personalize and schedule their ACH text templates.
- ACH Payment Confirmation Message: Sends after an account is connected and sufficient funds are available. Informs the payer that funds may take around two days to fully process their successful payment.
- ACH Payment Receipt Message: Sends after the bank transfer settles thanking the customer for their payment provides bank descriptor details, and a link to view their receipt.
- ACH Debit Failure Alert Message: Sends if a bank transfer cannot be finalized post-initial confirmation of account details and balance threshold during checkout. This situation may arise if a customer initially had sufficient funds but their account balance falls below the required amount before full settlement. In response, customers can choose an alternative payment method or indicate that they've resolved the balance shortfall.
Speedy, secure bank transfers paired with a direct line of communication enhances transparency and customer engagement for an excellent overall experience. Many fintech platforms and financial institutions also offer Same Day ACH or RTP solutions which present even more benefits to merchants and consumers alike.