ACH transfers, or payments made through the Automated Clearing House network, account for billions of dollars in payments annually. In fact, NACHA, the nonprofit that governs the ACH payments network reported 6.1% in payment volume growth in Q4 2021.
The average consumer commonly uses the ACH network for automated bill payments and larger transactions. However, the use of ACH payments in B2B transactions accounts for a large portion of payments made through the network and grew by 17.4% in Q4 2021.
Since many businesses collect payments from their customers and handle their own business expenses, ACH payments are already a substantial part of business operations
ACH payments use the same information as a paper check, but with additional benefits which have been diverting users away from traditional check writing. Here, we’ll discuss the main differences between ACH and check payments and the business benefits of accepting this form of payment.
ACH Payment Versus Check Payments: What’s The Difference?
An ACH payment requires the same information that is on a check, including the name of bank, type of account (checking or savings), and the routing and account number. These transactions usually process within one to three business days and are most commonly used for payments such as direct deposits for payroll, recurring bill payments, and B2B invoice payments.
Simply put, check payments are the analog version of ACH transfers. Requiring all the same information, a check payment accomplishes the same goal but takes a lot more time–and introduces more variables.
For example, once the check is completed, it is put in the mail, sorted at the carrier facility, sent out for delivery–and once delivered, the recipient needs to go through the process of depositing the funds. Not only does this pass through more hands and take more time than an electronic ACH payment, but there is also a huge amount of personal information present on a paper check, exposing the payer to potential identity theft.
Benefits of Accepting ACH Payments
The ability of a business to accept an ACH payment can be advantageous. Not only is this payment type a secure and low-cost alternative to credit and debit card payments, it often processes more quickly. The following is a list of some compelling reasons businesses should consider accepting ACH payments.
Faster payment delivery
As mentioned above, paper check payments take a longer period to process. Not only does it take additional time for the business to get paid, funds are not quickly withdrawn from the customer account. This additional time for payment delivery can cause confusion and errors and ultimately can have negative impacts on the customer experience.
According to NACHA, most ACH transfers process the same or next-day. In 2020 there was an average of 1.4 million ACH payments, with a daily value of $1.8 million. It is clear the tide is already shifting away from check payments, and adding ACH transfers may be a mutually beneficial offering for both businesses and their customers.
Lower processing fees
Compared to other payment methods like credit and debit cards, an ACH payment is far less expensive. With an average cost per transaction of $.29, ACH payments are a cost-saving option for businesses of any size.
This also makes ACH payments ideal for high-value transactions. When you’re selling products or services that cost thousands of dollars, you end up paying hundreds of dollars in credit card fees. Using ACH payments reduces your processing costs to a fraction of what you’d typically pay when a client uses a credit card.
Automate recurring payments
ACH payments are well suited for recurring transactions and are often used in many industries. For example, a law firm typically bills clients multiple times either for installment payments or ongoing hourly charges. Since these transactions are usually recurring and on the larger side, ACH transfers are an easy way to simplify the bill pay process. Once the client sets up a payment profile with their banking information, the payment can be automated and paperless.
Implementing ACH payments processing in your business can reduce the human error component of manual bill pay and check writing, thus increasing the speed and consistency of getting your invoices paid and improving the client experience.
Safety and security for your customers
Virtually every person has personal information outside of their control; whether it is payment information saved on a rogue shopping profile or a data leak exposing sensitive personal data, consumers have valid reasons to be concerned about identity fraud. Beyond the inconvenience of mailing a paper check, there is an increased risk of identity theft.
A recent study by the Better Business Bureau states that fraud and identity theft rose by 45% from 2019 to 2020. While this increase includes many scenarios, it’s important to think about how much unnecessary exposure is created in using paper checks as payment. The same study indicates a 72% increase in account takeover since 2019. As such, eliminating the use of paper checks whenever possible is a prudent step in minimizing exposure of personal information.
Beyond being less convenient than other payment types, check payments are being actively discouraged by industry professionals. The Federal Trade Commission offers straightforward advice: “don’t give out your bank account number.” Because check payments include not only the bank account number but also name and address, this payment method is not a recommended option.
With an ACH payment, customers need only to enter their banking information once (versus sending multiple check payments) on a secure platform and they are then ready to safely and securely process one-time and recurring payments with businesses that accept ACH transfers.
Reduce fraud for your business
Businesses that use paper checks for B2B payments are also at risk for fraud. It is estimated that 75% of businesses have experienced check fraud. Paper checks are being ditched by businesses and consumers alike because they are simply inconvenient and lack the security assurance of a digital payment method.
ACH payments are consistently ranked as one of the safest payment methods a business can accept, and are regulated by the Federal Reserve Bank and Electronic Fund Transfer Act.
User-friendly and easy set up with ACH payments
Many customers may not know they frequently use ACH payments already in their daily lives. For any business looking to implement ACH transfers as an accepted form of payment, it’s important to communicate how easy it is to set up. Customers need to share their information once, and so long as they don’t change their bank account information, they’ll be set up indefinitely for any payments that need to be made.
How to Implement ACH Payments
For any business assessing which payment options they should accept, it’s important to consider which payments are a good fit for the company and the customer. Chances are, if your business accepts check payments, adding ACH payments is likely a good fit.
If ACH payments are a good fit for the business, the next step is to choose the right payment processor. Choosing a payment provider that can handle multiple payment types streamlines this process and provides valuable insight into the financial health of the company.
Stax’s all-in-one payment platform can facilitate ACH transfers to streamline your billing operations—while helping you be more cost-efficient. With transparent pricing and no contracts, Stax makes payment processing a breeze
Accepting ACH payments is just one of many ways Stax can help modernize and secure your business.
