ACH Payment Processing 101

Remember the good ol’ days of making payments?

Traditionally, when a merchant wrote a check, that paper check slowly traveled from bank to bank before the money was actually taken out of the account. Times sure have changed.

In today’s digital world, a business can change a paper check into an electronic “debit” that is automatically paid from its checking account. One type of popular Electronic Fund Transfer (EFT) process uses the Automated Clearing House (ACH) network, a government-regulated electronic system in which financial institutions can transmit funds back and forth. The ACH process is similar to credit cards, except that senders and receivers use bank routing codes instead of traditional 16-digit credit card numbers.

Businesses are increasingly using ACH to collect from customers online as an alternative to accepting credit or debit card payments. ACH payment options are also used in transactions such as processing debit card transactions, business-to-business payments, online payments, accepting direct deposit, tax payments and more. ACH payment providers can take two forms  – push versus pull ­– that allow the merchant to collect payment either by directly “pulling” the money from a consumer’s bank account or by allowing consumers to “push” money to the business.

One major advantage: For merchants, ACH payments allow for a lower cost structure when compared to credit card payments. Consumers benefit through increased security that ACH push payment options provide. Why? Simply because customers never have to actually share personal information with the merchant. There are other customer benefits, as well, including direct deposit payroll and any other payments they owe that require monthly or quarterly billing.

ACH payments are not only budget friendly, but environmentally friendly, too. Because all transactions happen electronically, there’s no need for costly resources like paper, postage and ink.

If you would like help improving your company’s bottom line by eliminating manual processes and automating payment cycles with ACH processing solutions, Billing Tree can help.