For many businesses, credit and debit cards or cash are the main forms of payment used by their customers.  However, it is also important for businesses to be able to process ACH payments such as checks and contactless or mobile payments from apps such as Venmo.  Paper checks may not be used as often to pay for purchases at restaurants or stores, but merchants should still be set up to electronically accept paper checks to make processing this form of payment as easy as possible.

The use of contactless and mobile payments using apps like Venmo and Zelle have grown significantly since the pandemic.  Many people in Gen Z especially have come to prefer this form of payment as a convenient way to transfer funds directly from their bank accounts to complete a purchase.  If your business is not set up for ACH processing, you may miss out on plenty of sales and revenue from customers who prefer to make contactless or mobile ACH payments.

What is ACH?

ACH stands for Automated Clearing House which is a large digital network of financial institutions from around the world.  This network forms a single platform that allows banks and financial institutions to transfer funds between banks as well as to and from their customers.  Through this network, banks and businesses can push or pull funds by request, and it normally only takes a day or two for these transactions to complete.

When a customer makes an ACH payment to a business, the request is made through the ACH system and the amount is debited from the customer’s account by their bank and transferred to the bank of the business through the ACH network.  The business gets notification when its bank has received the credit from the payment.  These types of payments can be made without the use of checks or debit or credit cards.

Are ACH Payments and Payments by Check the Same?

ACH payments and payments made by check are not quite the same, but the way in which they are processed is similar.  The major difference is that ACH payments do not require cards, checks, or physical paperwork as all ACH transactions are done electronically.

They are similar in the sense that payments made by check are taken directly out of a customer’s checking account as soon as the check is processed and transferred to the bank account of the business accepting the payment.  Merchants that are set up to process payments by paper checks into electronic payments can process these payments faster over the ACH network.  Contactless and mobile ACH payments signal the automatic transfer of funds from the customer’s bank account to the business’s bank account without the need for a check or card. 

The Benefits of ACH Processing for Businesses

Having the capability to process ACH payments can benefit businesses in the following ways:

Reduced Costs

ACH payment processing costs businesses less than processing payments from credit and debit cards.  This is because there is usually a 2.5 to 3.5% fee attached to transactions involving credit and debit card payments.  There is also a fee to process payments from paper checks and even cash payments come with hidden costs such as bringing the cash to the bank to make a deposit. ACH payment processing is done automatically, and the processing fees are typically less than one dollar for each transaction. 

Offering ACH payments as an option to your customers improves the customer experience by giving them this payment option and it helps your business save money by avoiding the fees associated with other types of transactions.

Fast and Convenient

Processing ACH payments is faster and much more convenient for your business than processing payments made by cash, card, or checks.  All that is needed to process ACH payments is the customer’s name, bank account information, and approval.  The payments are transferred using routing numbers which never change unlike credit or debit card numbers, minimizing possible interruptions to the payment process.

The following make ACH payments fast and convenient:

• No time constraints
• Protected from loss
• No manual entry required

Better Cash Flow Management

Processing ACH payments allows businesses to have a more stable cash flow and better manage their funds.  The funds from ACH payments move directly from the customer’s bank account to your business account so you do not have to wait long for the funds to appear.  You can also schedule and automate ACH payments to a supplier or vendor to be paid when they are due, which makes managing the payments that your business has to make much easier.

Security of Payments

In general, ACH payments are more secure and better protected from fraud than credit card payments.  Credit cards can be lost or stolen and used to make purchases online before the cardholder or the credit card company flags the transactions as fraud.  Paper checks can also be stolen or lost which can disrupt the payment.

ACH payments are sent out in batches and the operators, banks, and payment processors involved have tools in place to check for and flag fraudulent situations, such as payments that are out of the ordinary for the purchaser or payments of larger amounts than normal. 

Some Customers Prefer ACH Payments

There is a growing number of consumers that prefer to set up automated ACH payments to manage subscriptions and recurring payments, and many of the Millennial and Gen Z generations have grown accustomed to using apps like Zelle and Venmo to make payments without the need to carry cards or even a wallet.  Your customers will appreciate that you offer ACH payments as an option, allowing them to forgo cash or card payments and use ACH payments that take the money directly from their accounts.  ACH payments are not just easier and more secure for your business, but also for your customers.

Check and ACH Payment Processing from First MCS

The ability to process ACH payments benefits a business in multiple ways from making your payment processing easier, cheaper, and more convenient to improving the customer experience by offering the option of making ACH payments.  Being able to process ACH payments also sets you up for future success as more people in the younger generations prefer to make ACH payments using contactless or mobile payments.

At First MCS, we offer merchant account services in which we can set your business up to for ACH payment and check processing.  Our payment processing solutions are PCI compliant to provide the highest level of protection against fraudulent or bounced checks, and to ensure security with ACH payments.  You can call First MCS at (866) 673-3099 to learn more about our merchant account services.