ACH Payment Processing – How Does It Work?
ACH or Automated Clearing House network is a robust payment method used by merchants across the United States. We are proud of the partnership that helps us in providing reliable ACH payment processing solutions to our Merchants across the United States of America.
ACH payment processing empowers transaction processing by utilizing the ACH network. With ACH the money can be credited or debited from checking and savings account. This solution is widely used all across the US ranging from East coast to West Coast.
Financial Institutions have experienced a huge deduction in check processing cost by using ACH. These transactions are fast and are done electronically. Traditionally the paper check transactions used to take a lot of time but with eChecks and ACH most of the time the transactions are completed within 72 working hours. This has helped Financial Institutions to lower down the cost of operations and also increase the level of customer satisfaction.
Since the last 30 years, banks have become very aggressive in terms of using ACH as a preferred mode of payment processing. The business community across the United States have also started to understand the benefits of an automated clearing house system.
NACHA creates the guidelines and rules for the entire ACH processing system. Any entity involved in the ACH processing has to follow the guidelines of the National ACH Association.
The merchant can use ACH facility directly from Bank and they can also go to a third party ACH processor. A third party ACH processor is a company that directly competes with ACH processing solution offered by banks.
At this point in time, there are many third party ACH processors. The benefits of using a third party ACH processor is that they offer a highly user-friendly interface and also handle the risk by performing required verification of each transaction.
The ACH payment processing is complex to understand but still will try to break it down into simple steps so that you can understand it better.
There are multiple ways in which your customers can pay you by using ACH. They can visit your website and put in the account number, routing number and other basic billing details. They may also give this information by calling your support number. Merchants who offer subscription based services and want to collect payments can also use the service.
Once the billing information is submitted by the customer, this information is verified by the ACH payment processor. The ACH payment processor system will validate the account number and routing number. The system will also validate the account for funds availability. Sometimes The ACH payment processor will also ensure that there is an agreement between the customer and the merchant. This agreement is mostly done in an electronic format and is maintained with the payment processor and merchant for records.
Most of the service providers prefer to do a phone verification before sending the transactions to be processed. This additional verification step helps merchants in reducing the return ratio and also help them to reduce the insufficient fund related errors.
Once the verification is done and approved by the internal team of ACH payment processor, the transaction is sent to the bank for batch processing. Once the ACH payment service provider receives the funds from the bank, then the processor sends the funds to the merchant business bank account after deducting the transaction charges or any other fees as per the merchant agreement.
Merchant from high risk industries can also use ACH or Echeck as a preferred mode of payment. There is a unique advantage of ACH, that is the dispute period is lesser than the regular dispute period on any credit or debit card. Most of the credit card have a dispute period of minimum 180 days, but in ACH or echeck the dispute period is less than 60 days.
Merchants facing a lot of Chargeback Disputes with Credit Card solutions can also try this solution. These Merchants are sometimes referred to be High Risk. ACH may take a bigger risk in terms of Returns.