Amid the rising usage of digital payments, ACH payments are growing more popular as well. In fact, 2018 saw a 137% increase in same-day ACH transactions over the previous year.
This growth makes sense since ACH payments (also called eChecks) were created as electronic replacements for paper checks. For example, instead of paying rent by dropping off a check with the homeowners’ association, you can pay in a similar, yet more efficient way, with ACH.
Billions of ACH transactions are processed each year, so it’s worth understanding how you can offer this payment method at your place of business. Let’s get started.
What is an ACH payment?
Short for Automated Clearing House, an ACH payment is an electronic payment that debits funds from a payer’s bank account and deposits them into the recipient’s account. This process occurs over a regulated financial network and is initiated by a payer entering bank account and routing number information.
ACH payments can be made in two ways: keyed in manually, by either a payer or merchant, or paper checks can be scanned and converted into a digital ACH transaction. Both methods are quick and convenient.
How does ACH benefit customers?
Because ACH payments directly debit funds from a payer’s bank account, many consumers prefer this payment method versus using credit. This is especially true for larger purchases or recurring bills, such as:
- Rent or mortgage payments
- Subscription services
- Monthly loan payments
Customers can set up automatic ACH payments in many cases, which eliminates their need to remember manual payments each month (or at any other regular interval). This saves time, minimizes the risk of missed payments, and makes it simple to handle bills.
How does ACH benefit merchants?
The introduction of same-day ACH payments in 2016 made ACH processing time considerably faster than paper checks, improving cash flow for merchants. Additionally, processing ACH payments generally costs less than processing card payments. And that savings can seriously add up over the course of hundreds or thousands of transactions.
We mentioned how automatic ACH payments can be helpful to consumers above, but they’re great for merchants as well. While customers enjoy the convenience of automatic payments, organizations often see a reduction in missed payments and better retention rates.
ACH payments are a win-win and more consumers are taking notice, contributing to the growing popularity of ACH.