As a business, ensuring that you have the ability to accept any kind of payment from your consumer is vital. While a good chunk of consumers prefer to use credit or debit cards, there are still plenty of consumers, especially businesses, that prefer to use checks. But if you ask any business, they’ll tell you: the use of paper checks is declining rapidly. More and more consumers and businesses are turning to the digital version of checks, or what it is most commonly referred to as, ACH transactions.
ACH stands for Automated Clearing House, which is essentially an electronic financial network that enables the movement of funds between bank accounts. The transfer of money via ACH (sometimes referred to as “paying by electronic check” or “eCheck”) can be helpful in many different scenarios.
One common use is when a business (or other organization such as a government entity) receives a digital payment from a customer for goods or services provided. Another is when a company pays its employee by what is called direct deposit — transferring funds directly from the company’s bank account to the employee’s. In both cases, a transaction that could be executed using a paper check is instead completed electronically. Why are both businesses and consumers showing a growing preference for ACH payments? There are many reasons.
Advantages of ACH Payments in Addition to Credit/Debit Card Processing
When you consider the many advantages of accepting ACH payments in addition to credit and debit cards, it’s not hard to understand why the volume of ACH transactions continues to climb rapidly. In fact, NACHA (the National Automated Clearing House Association) reports that the ACH Network plays a large role in U.S. commerce with approximately $43 trillion moved every year in the course of more than 25 billion digital transactions. This includes the full spectrum of payment scenarios, from employer direct deposit and government benefit payments, to electronic bill pay and person-to-person (P2P) transactions.
Here are some of the reasons that ACH is the “go to” payment process for many businesses and consumers:
- Convenience. Not only is a one-time ACH payment easy and efficient, payments can be set up to occur automatically. For businesses, this means not having to receive and manually review checks, make entries in a ledger, endorse the checks, and take them to the bank. For consumers, ACH frees them from having to remember to fill out a paper check, stuff and stamp an envelope, and make a trip to the post office on a regular basis.
- Security. No form of payment is completely foolproof. However, data indicates that paper checks are the payment method most affected by fraud. This may come as a surprise to many businesses and consumers who are, understandably, concerned about the safety of their digital accounts. However, it stands to reason since digital security measures continue to evolve to keep companies ahead of cyber criminals, while paper checks do not. They still have account and routing numbers printed on them and, if they are mailed, are handled by many people on their journey from sender to recipient.
- Speed. In our fast-paced modern world, the fact that it may take many days for a paper check to be sent, received, processed, and posted just isn’t acceptable to many businesses and consumers. ACH payments take place in seconds, giving both parties confidence that funds will be sent/received in a timely manner.
- Accuracy. Humans make mistakes. Whether that means transposing numbers when making a manual entry in a spreadsheet or database, or allowing an envelope to drop unnoticed behind a desk, it can have serious ramifications for organizations and their customers. As the physical handling of payments decreases, so does the error rate. Plus, with fewer errors, or none, the time previously spent on researching and resolving problems can be put toward higher-level tasks.
- Lower costs. Every business understands that accepting credit or debit cards means paying processing fees. And there are fees associated with ACH payments as well, so it would be easy to think that paper checks have the lowest overall cost. However, when you factor in the time and labor cost required to process checks, ACH tends to be the most affordable way to accept payments.
- Improved cashflow. Tied to the benefit of convenience is the reality that if you make it easier for people to pay, they are more likely to pay and pay on time. ACH makes submitting payments simple, which creates a more consistent and reliable revenue stream.
What to Look for in an ACH Platform
It’s easy to make a business case for ACH payments. Not so easy is choosing the right ACH platform. While an organization’s business processes will dictate the functionality it needs, some of the more important features include:
- Virtual terminal capability
- Real-time verification
- Recurring transaction capability
- Push notifications
- Robust reporting
- Pre-defined thresholds to help combat fraud
- Cutting-edge security with characteristics like tokenization
- Availability of both ACH and credit card processing through the same gateway, if you plan to do both
Ultimately, deciding to enable ACH payments and finding the right platform for your needs can streamline your operations, increase customer satisfaction, and support future growth for your organization. Thankfully, Base Commerce offers a secure connection through BaseX™ that offers both credit card and ACH payment processing in one place.