Pay-by-bank payment methods, such as ACH payments, are growing in popularity. Nacha, which manages the ACH Network, safely and efficiently processed 31.5 billion payments in 2023 valued at $80.1 trillion. That year marked the eleventh consecutive year in which the total value of ACH payments by consumers increased by at least $1 trillion. Furthermore, American businesses chose to pay by bank through the ACH Network to pay their vendors 6.6 billion times, a nearly 11% increase from 2022.
Those statistics should be of particular interest to point of sale (POS) ISVs and VARs. Not only does this give you an option to accept payments from your clients and pay your vendors. It’s an in-demand payment method that you can equip your clients to accept, adding value to the POS solutions you provide.
ACH Payments 101
ACH payments and other pay-by-bank payment methods differ from payment card transactions in several ways. ACH payments are bank-to-bank exchanges that process through a separate network, not a card network. Another difference is that they draw funds directly from a customer’s bank account. With ACH debit, the most common type of transaction at the point of sale:
- The consumer initiates the transaction.
- Nacha or other originating depository financial institution (ODFI) contacts the receiving depository financial institution (RDFI) to request a fund transfer.
- If enough funds to cover the payment are available, the transaction is approved.
The ODFI sends requests in batches and settles transactions at several intervals throughout the day. Most transactions are settled in one day, but they can take up to seven days.
The Benefits of ACH Payments and other Pay by Bank Methods
Enabling your clients to accept this payment method has benefits related to both enhancing customer experiences and operational efficiency. For your clients who still accept paper checks, ACH payments give customers a way to pay directly from their bank accounts more quickly and securely. For the merchant, it eliminates processing checks, saving time and money.
Additionally, paper checks are the payment method most susceptible to fraud. The Federal Reserve reports that in 2022, banks filed nearly 450K suspicious activity reports for check fraud, up from about 250K in 2021. ACH payments minimize that risk. Additionally, ACH payments are processed more quickly than paper checks, so merchants see funds in their accounts sooner.
ACH payments also compare favorably to credit card payments. For the consumer, credit card debt doesn’t build up, and there’s no interest to pay. For the merchant, processing fees are lower. ACH payments generally cost a flat rate of 0.26 to 0.50 per transaction versus credit card processing fees of 1.5 percent to 3.5 percent of the total transaction amount. The difference can represent significant savings for merchants.
There’s No Need to Replace. Just Expand.
Although ACH payments compare favorably with other payment methods, remember that it doesn’t have to be the choice of one or the other. Your clients can accept them all. Equip your clients to accept all forms of payment, so they can offer the payment experiences their customers prefer and, possibly, increase their loyalty.
To provide your clients with an omnichannel solution that supports pay-by-bank payments in addition to credit, debit, contactless, unattended, and alternative forms of payment, you need an experienced payment partner.
Datacap Systems has decades of experience working with VARs and ISVs to provide merchants with all the technology and tools they need to accept electronic payments. To learn how to give your clients the ability to accept ACH payments in addition to a full range of other payment methods, contact us.
