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Introduction

ACH payments are one of the core focus of our entire business. VoPay supports ACH payment processing for Canadian businesses operating in the US, providing a complete one-stop-shop selection of payment services across the US and Canada.  So, if you’ve come to dig in and learn about ACH payments—you’ve come to the right place. 

ACH payments are hitting record growth numbers with payment volume climbing 9.9% in the second quarter of 2021, with particularly strong growth in B2B payments.

The overall trend is that businesses are moving away from paper payments and going fully digital. The ACH Network enables this growth and supports fully electronic B2B payments.

Moreover, with ACH payment processing growing in volume, there are many benefits to businesses across several industries. In this in-depth guide, we’ll explore what ACH payments are, how they work and the various workflows available.

What are ACH Payments?

The Automated Clearing House (ACH) network is a US system run by the National Automated Clearing House Association (NACHA), which enables bank-to-bank transfers without paper cheques or credit card networks, wire transfers or cash. More than 25 billion ACH transactions are processed each year by the Automated Clearing House (ACH) Network, an electronic network of banks and financial institutions supporting both ACH credit and debit payments.

Prior to updates in technology and utilizing payment facilitators like VoPay, ACH payments were complicated and slow to process, usually taking at least 5 days to clear. Today, with the help of upgrades in technology and legacy systems, we offer multiple ACH payment solutions with a far simpler user experience. Plus, same-day processing, which makes it accessible and convenient to businesses of all sizes. Let’s take a look at how these payments work and how they are used by businesses.  

How does ACH Payment Processing Work? 

To understand how ACH works, it can be helpful to recognize the key players involved. First off, NACHA is the regulatory body governing the ACH network. Second, there are ODFIs (Originating Depository Financial Institutions) and RDFIs (Receiving Depository Financial Institutions). An ODFI is a financial institution, from which the ACH transaction starts or originates, while an RDFI is an institution that receives the ACH transaction.

ACH Payment Workflow

Alicriti, 2019

For example, in the B2B space, if you run an ISV company, your bank (your payment gateway’s bank typically) would be the ODFI, while your customer’s bank would be the RDFI. Your customer authorizes your business to debit their bank account on their behalf for single or recurring transactions.

Finally, third-party processors, like VoPay, make it easy to connect to the ACH Network and facilitate ACH transactions. We provide a few API endpoints that allow businesses to connect directly from their current platform, along with an intuitive dashboard. You can use this technology to streamline operations and more efficiently manage your cash flow. 

ACH Processing Speeds

Currently, ACH transactions don’t happen in real-time. Instead, banks use “batch processing” to process the entire day’s worth of requests at once. Same-day ACH payments do not make instant payments or even same-day funds, necessarily. The same-day transaction means that every bank in the US supports the ability to process outstanding requests three times a day instead of once. Not all transaction types are eligible to settle same-day, but virtually every payment processes faster.

VoPay has the ability to enable ACH credits to be processed on the same day, as long as the transaction gets submitted before the daily cut-off times.  However, due to security regulations, ACH debits cannot be processed on the same day. The funds will be held for 2 to 3 days before becoming available. And then those funds get deposited directly into bank accounts.

How can I use ACH Payments for my Business?

Whether you’re familiar with ACH or some of its more common names—Direct Deposit, Direct Payment, direct debit, or an electronic cheque (eCheck)—you have most likely used it without knowing. 

Millions of North Americans use ACH  while paying a bill online, setting mortgage repayments or other recurring payments automatically withdrawn throughout the month.

ACH transactions are processed in two ways: credit or debit. The ACH debit process is the withdrawal of funds from a bank account (such as setting up an automatic monthly loan repayment). The ACH credit process is pushing funds into a bank account (such as payroll or supplier payments). 

Here are a few more examples of ACH uses cases: 

VoPay, 2021

Top 5 Benefits of ACH Payments for Businesses

Businesses offering ACH payments to their customers can reap many benefits. For example, as a business, you’re providing your customers with an alternative form of payment, making your payment options more flexible. Moreover, ACH payments are faster and more cost-efficient than processing paper cheques or credit cards.

1. Faster processing times

The ACH payment processing time is much faster than paper cheques. Thanks to its digital process, which includes not going to the bank to make a deposit. The typical turnaround time is 3 to 5 days, just a day or two slower than credit card transactions. Faster processing times are available through VoPay’s iQ11 service

2. Lower processing costs

Despite being a bit slower to process than credit cards, ACH transaction fees are a fraction of the cost. For example, credit card transactions have two associated fees: a percentage of the total amount (1.5% to 3.5%), as well as a processing fee of $0.10 to $0.30. ACH payments will typically be either a flat fee between $0.50 to $1.50 per transaction or a percentage fee of about 0.5% to 1.5%.

3. Predictable Cash Flow

Faster processing time and lower fees aside, the other huge advantage of ACH payments is the predictable revenue from recurring payments. Setting up ACH payments for monthly subscriptions or loan payments ensures that your business knows exactly when funds will be available. 

4. Less Prone to Error

Automated transactions, digitally processed without human interference, are much less prone to error than manual processes. 

5. Reduce Failed Payments & Chargebacks

For businesses that primarily use credit cards or cheques for payment processing, both methods come with the risk of a failed payment, due to insufficient funds coupled with much higher decline rates with credit cards. Using next-generation ACH payments, businesses can verify funds prior to processing the transaction and have full visibility into the transaction timeline. Ultimately, helping to alleviate the risks associated with cheques and credit card processing. 

Overall, ACH makes a lot of sense for heavy-volume transactions and monthly recurring payments. Finally, let’s take a  look at how VoPay technology helps implement the above benefits for your business. 

VoPay ACH Payment Technology 

When choosing the right payment processor for your business needs, there are many factors to consider. For example, when considering VoPay for an ACH solution, it is important to understand that ACH and EFT payment processing are the core focus of our entire business. We understand these payments inside out. It is our mission to bring ACH payments into the modern world by eliminating the painful manual processing of these payments, to enable businesses and enterprises to have a safe and easy way to transact with their clients. VoPay provides businesses access to this banking infrastructure with an ACH payment API. We offer two types of ACH payment processing options, including standard processing (3 days) or iQ11 ACH processing, allowing for same-day processing in most cases. 

VoPay iQ11 ACH Solution

Launched in 2019, VoPay’s Intelligent ACH (iQ11) adds a layer of data intelligence to ACH payments to make them faster, enables bank account verification and reduces return transactions (NSFs). We utilize Open Banking technology to verify and validate all the necessary data and information, such as the ownership of the account, available balance, account information and account performance history. This all happens at the time the user initiates the first transaction and links their preferred bank account to the merchant app or digital platform. 

VoPay’s ACH API payment solution is currently available only for VoPay customers with a registered business in Canada looking for a more efficient way to pay their US customers or suppliers. 

Get in touch today!

VoPay specializes in ACH payments at scale through API integration for large businesses and enterprises. Whether you are a digital platform, lender or SaaS business, we would love to speak with you to learn how we can help you revolutionize your payment technology. Businesses must be registered in Canada with operations in the US to qualify for VoPay’s ACH service.

Contact us today for a demonstration of our services. 

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