ACH (Automated Clearing House) accounts allow businesses to make and receive debit payments over an electronic system. According to research by NACHA-The Electronic Payment Association, nearly 60% of account transactions via ACH payment are conducted by the commercial sector, with the other 40% conducted by government entities.
These statistics show the acceptance of ACH payments among businesses and their customers. But businesses should perform their own assessment of whether an ACH account would be beneficial. Below, we look at the benefits of ACH payment from two perspectives: a business perspective and a customer perspective.
From a business perspective
Business merchants prefer Automated Clearing House payments over check payments for several reasons, including:
Payments post faster. Funds from ACH payments are usually transferred in 24 hours. After a customer authorizes a payment, a business’ processing bank processes sends the transaction to an ACH operator, who forwards it to the customer’s bank where funds are removed and transferred to a business’ processing bank.
Check fraud is reduced. One of the main reasons businesses stopped accepting checks is the security of credit payment versus check payment. ACH payment increases the security of check payment by ensuring availability of funds prior releasing a product or service to the customer.
Reaches customers who don’t use credit. According to a 2009 analysis by TransUnion—one of the nation’s top three credit reporting agencies—over 70 million Americans do not have a general-purpose credit account. By offering ACH payment, businesses reach customers who prefer to pay by check.
Low transaction fees. The transaction fees for ACH payment are usually lower than credit transaction fees, preserving significant revenue in the long run. ACH fees are also lower than Paypal fees.
From a customer perspective
In addition to being a viable alternative to credit payments, Automated Clearing House payments benefit customers in the following ways:
Eliminates lost or stolen checks. Almost everyone knows the anxiety of a lost or stolen check. When paper checks are replaced with electronic checks, the possibility of lost and stolen checks disappears.
Eliminates late payments. Check sent by mail can arrive late, which could affect one’s credit rating. The instantaneousness of electronic check payments eliminates accidental late payments, which also means companies receive payments when they expect them.
Eliminates postage expense. Postage was once a necessity of remote payment by check, one that cost people thousands of dollars over their lifetime. With electronic payment, the need for postage is eliminated.
Easier than filling out a check. In an age where convenience has gone from a luxury to a necessity, allowing customers to pay by electronic check is good business. It also decreases the time customers have to reverse their buying decision.
At AVP solutions, we understand the benefits of ACH payments from both sides of the equation: business and customer. That’s why we encourage businesses to open an ACH account to meet their customers’ needs as well as their own. In addition to using our ACH accounts for receiving payments, our clients also use them for insurance payments, vendor payments, payroll depositing.