What Are ACH Payments
ACH (Automated Clearing House) is a digital network designed for processing payments and is essentially a simplified version of electric fund transfers (EFT). The majority of fintech businesses use ACH to build their apps over, which means you’ve likely made an ACH payment without knowing it.
As well as making payments, you can receive an ACH deposit, which are payments such as payments for work performed, tax refunds, and Social Security benefits. If you are ready to receive ACH deposit payments, start by choosing an ACH processor. Check with your bank and find out its ACH fees. Or look for an ACH operator such as Yodlee, which provides analytical financial services and robust account verification systems.
Open an ACH Merchant Account
Before you can make and receive ACH payments, you need to set up an ACH merchant account, which lets you access the network. Once you’re all set, you can withdraw payments directly from end-user bank accounts. To get the ball rolling, you will need the following:
- Federal tax ID.
- Company address evidence.
- Incorporation certification.
- Valid ID of all owners.
- Processing volume estimations.
Seek Customer Authorization
When you’ve completed the step above, you need to gain authorization from your clients. It is likely you’ll want to get authorization only from those you do business with on a regular basis. The authorization process is simple and replaces the need for a traditional signature. There are many ways to get authorization for payments, including:
- Online payment form submission.
- Written order form with signature.
- Verbal agreement via a recorded message.
These days, thanks to the digitization of the world, the majority of ACH providers have created ways to gain authorizations online. Opting for the digital method reduces friction and makes customers’ payments feel like another simple step in the online checkout process.
Setting Up Payment
Whether you’re retrieving authorization physically or digitally, you will need to collect further relevant information including:
- Customer name.
- Bank name.
- Account number.
- Account type.
- Routing number.
If you’re setting up a recurring ACH payment, you’re only required to process this information once. When taking larger payments, you can use micro-deposits to verify that all account information is correct.
Inputting Payment Details
Once you’ve gained authorization and are satisfied that the customer’s account details are correct, you simply need to put them into the ACH network. This can be done through processing software, third parties, or payment gateways. You will need to wait between 3-5 days for funds to clear into your bank, which is roughly the same as standard debit transactions.
Conclusion
Creating a successful online customer experience requires seamless integration between browsing and paying for a product or service. To reduce friction in 2022, you can register with the ACH network and receive money through your bank or fintech platforms, such as Venmo. This needs some upfront effort, but is rewarding in the long run.
