5 Reasons To Accept ACH Payments
Nearly every merchant will offer credit/debit cards as a payment option. And although they are declining in popularity, checks are still accepted by many businesses. However, accepting ACH payments should not be overlooked.
ACH payments are widely used, especially for recurring bills, direct deposits, government payments, making donations and in ecommerce. There are many advantages to accepting them, but let’s start by explaining the basics of ACH payments and how they work.
What Are ACH Payments?
ACH is also known as the Automated Clearing House. The system allows the transfer of electronic payments and its run by National Automated Clearing House Association, or NACHA, NACHA settles payments in batches throughout the day, and its regarded as an highly efficient payment method for both consumers and businesses alike.
ACH payments are used by a variety of business types, including business 2 business, and business 2 consumer, and they allow both direct deposits and direct payments.
In 2015, there were 24 billion electronic financial transactions, worth a total of $41 trillion, according to the official website.
And the popularity of ACH payments is easy to understand once you are aware of the many benefits. They include:
ACH Payments Are Fast
ACH payments are efficient. Typically, credits used to take 1-2 working days to clear, while debits were cleared by the next working day. However, NACHA have recently made some changes to make the process even faster.
Recently, NACHA has been making efforts to shorten settlement times; as a result, they’ve committed to switching to same day settlements on nearly all transactions. The program is being introduced in three phases, and you can read more about it here.
ACH payments are also quicker than check payments, which can be subject to postal delays, and you don’t have to wait for them to clear, which can take up to five days with checks.
Another advantage of ACH payments, which can help hasten their speed, is the fact they are less open to disputes than credit card payments.
Credit card payments can be subject to chargeback dispute for a multitude of reasons, such as disputed or unathorized transactions, misleading descriptions or clerical errors, and they are more open to fraud. However, with ACH payments, there is a limited amount of reasons that a transaction could possibly be questioned, and the additional authorization methods leave them less likely to be subject to fraud.
ACH Payments Offer Greater Security
For several reasons, ACH payments are also considered more secure than other payment options. Unlike checks, ACH payments won’t go through the post so there is less chance of them getting lost in the post or falling into the wrong hands; this means they are less likely to be tampered with, which gives both the consumer and the business owner greater peace of mind.
Then there are the efforts of the industry itself. The National Automated Clearing House Association has several risk mitigation measures in place to improve the security of transactions, such as watch lists, encryption, authentication and authorization.
The authentication and authorization steps give ACH payments a level of security that might not always available to other forms of payments such as checks and credit cards. Also, the funds must be in the bank so the business or merchant can be more certain they are going to get their money.
ACH Payments Are More Cost Effective
If you’re looking to save money on transactions, then ACH payments are more cost effective than some of the alternatives.
First, they reduce or eliminate the need for paper checks, so you don’t need to take the time to bank them, which saves resources.
Moreover, they can save you money on transaction fees. Credit card fees can cost you up to four percent, however, ACH fees don’t cost as much because they are processed in batches, which is less expensive.
Wider Payment Options for Your Customers
By introducing ACH payments, you can offer a wider variety of payment options to your customers, and its widely recognized that the larger range of payment choices you have, the wider customer base you’re likely to appeal to.
For instance, credit card payments, especially Visa and MasterCard are still the preferred payments among American and Canadian ecommerce shoppers interviewed for a Bizrate survey, while B2B companies and some older people still prefer checks, even though they are starting to lose favor.
But by adding ACH payments as an option, you’ll by offering greater flexibility to customers of all demographics. ACH payments are suited to a variety of customers, including subscription based businesses that need an easy way to collect regular payments and merchants that collect recurring payments like mortgages and direct debits.
However, although ACH works well for recurring bills, it will work equally well for occasional payments or once only payments too.
ACH Payments Offer Greater Convenience
ACH payments provide convenience for merchants and customers: the customer only has to set up the payment once for a recurring bill, so they don’t need to remember to write out checks/card payments every month and post them or pay online. That way, the business owner doesn’t need to worry about getting their payment, and the customer is less likely to fall behind with their bills.
If the merchant is running a subscription business, they don’t need to send out reminders, because the ACH payments will be sent out automatically for them, and the business owner can have more certainty over the income they’ll have coming in.
Speed, security and cost savings are just some of the advantages that can be gained from ACH payments, and they make a great additional payment option to offer to customers who might not want to provide their credit card details, or send checks through the post.
ACH payments are also less likely to be open to dispute, and unlike credit cards, they aren’t open to chargebacks.
However, although ACH payments, do offer many advantages to businesses and consumers, that doesn’t mean that merchants shouldn’t also offer credit cards, checks and other payments too, just that ACH payments might complement their business model, while also working well to meet the needs of their customers.