How ACH Payments Work: A Step-By-Step Guide

Some payment processing providers offer ACH payments as one of their services for merchant accounts. Most merchants have not put much thought into accepting ACH payments, but this type of payment processing can be beneficial. To see if it is right for you and how to accept ACH payments, continue reading.

What is an ACH payment?

An ACH payment is a type of payment processing that involves an automatic and electronic transfer of payments that goes between banks. The ACH in the name is the acronym for Automated Clearing House. This Automated Clearing House is the financial network in the United States responsible for overseeing and managing ACH deposits. The federal government, as well as the National Automated Clearing House Association (NACHA), regulates the ACH payment network, providing security and confidence in the payments.

To consumers, ACH payments come up as direct deposit paychecks or the method of bills paid online. They are similar to using PayPal or Venmo to send money, but with unique regulations and processes.

Why you should accept ACH payments

In addition to other types of payment processing, you should consider accepting ACH payments for multiple reasons, from customer convenience to ease of acceptance. Customers will appreciate the ability to easily transfer funds out of their bank account and into your business’s bank account, all electronically.

Many businesses accept ACH payments since the ACH network moves approximately $43 trillion every year. This shows demand and that payment processing providers are aware of a demand for this type of payment in their merchant services.

The process of accepting ACH payments is also simple. It is also very hands-off and lets you easily accept payments even from customers who are not present. That would not be the case with checks or cash. There are also lower fees associated with accepting ACH payments than some other methods. You will likely pay a payment processing fee, but this should be less than the interchange fees charged by credit card networks.

ACH payments even make sense from the standpoint of accounting. This is because banks will automatically record ACH transactions, letting you view the transactions easily on your bank’s website or application.

Are ACH payments safe?

The fact that the federal government and NACHA oversee and regulate the ACH network adds security to the payments. NACHA strictly enforces various guidelines and operating rules, which protect the sensitive information of you and your customers.

To ensure your ACH payments are safe, choose a payment processing provider that fully complies with the rules outlined by NACHA.

How long does it take to process an ACH payment?

ACH payments get processed during standard business hours. This happens at three points throughout the day. This is in contrast to wire transfers, which banks process in real-time. instead, you should keep in mind that funds from ACH payments may take several days to arrive in the bank account.

The good news is that NACHA introduced new regulations that mean most merchant services will allow for same-day payment processing. However, the availability of this expedited ACH processing is up to the payment processing provider or financial institution, and it may come with a fee.

How ACH Payments Work

There are seven main steps to processing ACH payments.

1. The first step occurs when the originator initiates the ACH transaction. The originator can be a bank, business, or individual.

2. From there, the bank of the originator will submit the ACH entry.

3. Banks send ACH entries to ACH operators in batches. Each bank has a predetermined schedule for sending these batches.

4. The ACH operator within the network sorts the entries into deposits and payments.

5. Following sorting, the ACH operator sends the entries to the recipient bank.

6. The receiving bank must confirm the originator’s account has enough funds to allow for the transaction.

7. Finally, the receiving bank either debits or credits the account of the receiver depending on if it is a payment or deposit.

Businesses can easily expand their payment processing options to include ACH payments. This will offer convenience to customers and let you take advantage of payments via the regulated ACH network. Trillions in transactions are conducted via the ACH network annually, demonstrating its reliability.

Zenti Services offers ACH payment processing as part of its merchant services. This allows businesses to accept ACH payments easily and without additional effort. That is just one of the many types of payment processing that Zenti Services gladly offers its clients.

Contact Zenti Services to learn more about ACH payments as well as the other payment methods we support in our merchant accounts.