Payment Basics: ACH/EFT Processing

ACH stands for the Automated Clearing House, a federally regulated network for the processing of electronic payments. The ACH network is governed by the NACHA Operating Rules, which usher risk management and security procedures for the electronic payments industry. Each payment process (transaction) and its accompanying data are governed by the NACHA rules, which are continually optimized to meet the strictest security standards.

EFT stands for electronic funds transfer and refers to the electronic exchange of funds between accounts. ACH and EFT are terms that can be used interchangeably.

Both ACH and EFT electronically transfer money directly in and out of bank accounts. Many of us use this when we pay bills online. We simply enter our account and routing numbers, and the payment is deducted from our bank account on a specified date.

How does ACH/EFT processing work?

ACH and EFT are quite simple. On the customer end, you typically will enter your bank account information into a payment screen and select a date for payment. The payment is processed on that date and is deducted from the chosen account.

On the business side, ACH and EFT processing can be handled in a few different ways. A merchant can choose to integrate the option into a checkout solution, or they can also choose to process with ACH/EFT if they still wish to take paper checks. In this example, a business or entity would process a batch of ACH/EFT payments at once after receiving the paper check payments. These can be entered into an electronic system using a virtual terminal on the backend.

ACH and EFT processing is common with many eCommerce retailers, but especially rental companies, utility providers and gyms that utilize memberships. ACH/EFT is also often used in processing payroll, handling subscriptions, and with government purchases.

What are the benefits of ACH/EFT processing?

Instead of relying solely on credit card information, which some customers may or may not have, ACH/EFT allows people to process payments with just their bank account number. It’s just like writing an ordinary paper check, except it’s much easier and far more efficient. In fact, this type of payment is often referred to as an eCheck or electronic check.

ACH/EFT payments are instantly entered into the payment process, rather than suffering from the requirement of posting at the bank. This eliminates the hassles associated with traditional check processing; there’s simply no need to wait for snail mail payments or to run to the bank.

Additionally, making ACH/EFT available as a payment option for customers can reduce the costs and burdens of late payments for everyone. Sometimes a bill can slip by, but if a customer can log on and pay instantly through their bank account – they’re far more likely to pay right away. You can also use features like recurring billing, which allows you or your customer to set up scheduled payments in advance, greatly reducing the potential for missed payments.

ACH/EFT is much more secure than processing traditional paper checks. Combined with features like account verification and payment tokenization, choosing ACH/EFT is a smart way to boost sales while providing a convenient and secure payment option for your customers. It also can come up a bit cheaper than credit card processing, just take a look here.

To find out more about Forte Payment Systems’ ACH processing services, try here. If you have any questions about ACH or any of the other payment solutions that we offer, give us a call at 866.290.5400 – or give us a shout on Facebook or Twitter!

Photo credit: Aloud..

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