You may or may not have heard about ACH (Automated Clearing House) Payments, but they can make a huge difference in your business.
In this article, we will explore some of the main differences between ACH payments and traditional payments and how they can benefit your business.
What Are Automated Clearing House Payments?
ACH payments are a form of digital payment, similar to bank transfers. The main difference between an ACH payment and a traditional bank transfer is the way they are processed.
A bank transfer such as a wire transfer is processed in-house by your banking provider. An automated clearing house payment, on the other hand, would be sent in bulk alongside other payments to a middleman, who deals with processing the transactions.
There are more than 10,000 financial institutions involved in the ACH payment network. They can be used for paying both one-off payments and also regular business outgoings paid by digital means.
What Are The Benefits of ACH Payments?
ACH payments have a lot of benefits over a wire transfer payment, primarily, the cost is significantly cheaper.
An international wire transfer can cost upwards of $20 in charges, whereas an ACH payment usually costs less than $1.50 to process and some providers even offer them free of charge. If you are making a lot of digital transactions as part of your everyday banking, then ACH payments could save you a significant amount of money.
In addition to this, ACH payments are considered safer. This is primarily because there is a delay between the initial transaction processing and delivery of the funds to the recipients, which means if you find the company you are paying is fraudulent, or you have made a mistake, then you have time to reverse the payment. With a traditional bank transfer, after the initial transaction has been completed, reversing it is extremely difficult.
Payment information is also encrypted as it is sent.
If you would like to learn more about ACH payment services then you should check out Yodlee’s guide to how ACH processing works. Yodleeis a financial services company offering all kinds of products beneficial to your business. These services include everything from ACH payment services to account verification, so you know you are paying the person you think you are!
What Are The Disadvantages of Automated Clearing House Payments?
The main disadvantage of ACH payments over wire transfer is that it is slower. If you require very fast payments, then wire transfers are usually much faster. They are usually instant in the case of domestic transactions and 1-2 days for international transactions.
In comparison, ACH payments can take between 3 and 7 days to process for domestic payments.
So, if you are a business that requires very fast payments, then ACH payments may not be a good solution for you.
Summary
ACH payments are a great option for businesses who do not require extra speedy service, as they will reduce the outgoing costs of your payment needs and provide you extra protection on your transactions.