While ACH processing has been around since 1972, with the formation of the first ACH association in California, consumers are increasingly turning to ACH today as their preferred payment method. In fact, for the last ten years, ACH payments have increased yearly by more than $1 trillion. Additionally, Nacha (originally the National Automated Clearinghouse Association and formed to administer the ACH Network) reports that in 2022, 30 billion ACH payments were processed, totaling $76.7 trillion, an increase of 5.6 percent over 2021.
As consumers, businesses, and organizations continue to choose the convenience and ease of ACH payments, ISVs and VARs need to equip merchants with the technology they need to implement ACH processing.
How Does ACH Work?
Automated Clearing House (ACH) transactions enable businesses and consumers to make electronic, bank-to-bank money transfers. Quick, convenient, and often free, ACH payments transfer money from one account and directly deposit it into another. It has often been the method of choice for distributing employee paychecks into accounts, transferring bill payments, and for B2B merchants with high-cost services and products.
However, as the digital landscape evolved, consumers demanded more payment choices. This includes leveraging ACH processing for smaller recurring subscriptions, peer-to-peer payments, and even e-commerce and in-store payments. Nacha has responded to the ever-growing volume of transactions through the ACH Network by implementing Same Day ACH in 2016. This service has allowed consumers and merchants the convenience of transferring and receiving payments more quickly and easily than in the past.
Advantages of ACH Processing for Merchants
Accepting ACH payments has a variety of benefits for merchants:
- Lower Processing Fees
ACH processing is far less expensive for merchants than credit and debit transactions or paper checks, which can cost as much as $20 per transaction. Over time, the cost-savings for merchants from giving customers the option of making ACH payments are significant. - Increased Security
Since ACH is processed bank-to-bank, it is inherently more secure, especially when replacing paper checks. Checks can be lost and mishandled during their journey from issuance to deposit, not to mention that the issuer’s account details and personal information are visible on every check. In 2022, the number of check fraud incidents increased 94 percent over the previous year.ACH processing reduces the risk of error and fraud because it is direct with no intermediaries. ACH payments are also resistant to many fraud attempts.
- Easy Recurring Billing
In the rising subscription economy, ACH processing not only makes it easy for consumers to quickly and conveniently make recurring payments, but it’s also easy for merchants to implement. Additionally, with recurring ACH payments, B2B merchants receive funds reliably and on time as opposed to relying on customers to remember to send payments when receiving an invoice. - Customer Satisfaction
Consumers prefer ACH payments, especially over paper checks. As check transactions continue to decline, ACH payments allow consumers to draw funds from their bank accounts to make payments. Furthermore, as consumers became accustomed to ACH processing, they naturally wanted to use this payment method for e-commerce and brick-and-mortar purchases.
- Operational Efficiency
ACH gives merchants greater control over cash flow, increased visibility and bookkeeping accuracy, and improved forecasting.
Why ISVs and VARs Should Provide ACH Payments
When consumers are deciding where to shop, the top-ranked digital shopping feature is the ability to use their preferred payment method. As ACH processing continues to be a more popular choice, consumers will demand it from merchants — and those lacking will risk losing to competitors who deliver in-demand payment experiences.
Growth-focused ISVs and VARs will work with their payments partner to give merchants this capability. Learn more about adding ACH payments to your offerings by contacting our team.
