Automated Clearing House (ACH) payments have become a dominant payment option for many businesses in the United States. They are used in a variety of ways such as paying employees, paying suppliers, and paying taxes. Perhaps the most common way ACH is used is in accepting payments. This article will look at some of these use cases in detail as well as some others you might not know about.
Funding Customer Accounts
Businesses that provide financial or brokerage accounts for trading stocks, buying cryptocurrency, or digital wallets typically use ACH to fund these accounts. ACH is a cost-effective option for these types of transactions for both the business and its customers.
The customer provides the details of the external account they would like to use to fund their new financial or brokerage account, add the amount of money they would like to transfer and the business connects the two accounts. The customer can then “push” funds from their external bank account into their brokerage, trading, or financial account any time they like.
ACH has become exceedingly popular for accepting payments for goods and services. It is advantageous for businesses in this use case because it is fast, secure, and is either free or provides reasonable fees for both the originator and recipient.
To accept ACH payments, a business can partner with businesses such as Yodlee which provides safer and faster ACH processing services. Yodel provides account verification services to ensure secure transactions. Yodlee ACH payments ensure you get paid fast, eliminate manual payment options, and reduce risk. You can learn more about Yodlee ACH payments on their website.
Enabling Movement of Funds
Once someone has funded a digital wallet or another type of financial account, they will want to spend their money. That could be through biting goods or services or peer-to-peer fund sharing. ACH is a safe, reliable, and easy way to facilitate this. This is why it is the preferred method used by many payment platforms including Venmo.
Recurring and Billing Payments
The world is moving to a subscriber model where we pay monthly for almost everything we need. Businesses that have embraced this model need a way to bill their customers monthly or at specific intervals. ACH direct debit (auto-pay) is used by numerous businesses for this function.
Businesses that use the direct debit option range from those selling software to those selling newspapers and insurance premiums. These businesses only need the customer to authorize the transaction once and they can bill them every month as long as they do not cancel their subscription or account.
The Internal Revenue Service (IRS) allows people to use tax preparation software to prepare their tax documents. Those who use this option are allowed to use Electronics Fund Withdrawal to pay their taxes. This is an ACH debit process which means the IRS will “pull” money from your business account.
ACH payments are convenient for businesses and their customers in various ways. They are also secure and fast, with lower fees than most other payment options.