The Definitive Guide To ACH Payments: What Are They and How Do They Work?

Posted on February 5, 2024

Known as the dominant retail payment rail in the U.S., using ACH payments for payouts and collections has become commonplace. In fact, 2022 was their tenth consecutive year when the total value of ACH payments has increased by at least $1 trillion. 

ACH payments are a type of electronic funds transfer made through the Automated Clearing House (ACH) network. In Canada, when you move money between bank accounts, it is referred to as an EFT, whereas in the U.S., it is the same functionality; however, it is referred to as an ACH payment. 

This comprehensive guide covers everything enterprises need to know about how this payment solution works and how to use it in your organization.

What are ACH Payments?

ACH Payment Types and Examples

What Is The Difference Between ACH Credit and ACH Debit?

ACH Debit: Pulling money

ACH Credit: Pushing money

Automated Clearing House Network And Nacha

ACH Payments Canada: ACH Vs EFT 

How Does ACH Payment Processing Work?

What You Need To Know About Current ACH Payment Practices

How To Make ACH Bank Payments With VoPay 

How To Set Up One-time Or Recurring ACH Payment

How Long Does An ACH Payment Processing Take?

How Can I Use ACH Payments In My Business?

ACH Business Use Cases 

Top Benefits of B2B ACH Payments

VoPay ACH Payment API Technology

What Are ACH Payments?

ACH payments are electronic bank-to-bank transactions processed through the Automated Clearing House (ACH) network. The ACH network is known for its high level of security and reliability, making it a trusted method for electronic financial transactions.

ACH payments have become a vital component of the American economy, offering a convenient, efficient, and often cost-effective way for both individuals and organizations to manage scheduled payments and large-volume transactions.

Most American businesses and merchants are familiar with the term ACH or some of its more common names—Direct Deposit, Direct Payment, direct debit, an electronic cheque (eCheck), bank account payment, account-to-account payments, or A2A payments. 

ACH Payment Types and Examples 

A common example of an ACH bank transfer that most recognize is a mortgage payment. Other notable examples include ACH direct deposits, payroll, online bill payments, tax refunds, and vendor payments for merchants. Since ACH transfers do not require human intervention, they have become the go-to choice for recurring payments and high-volume transactions.

The abilities of the ACH network are wide and varied and can support almost every payment need, including: 

  • Consumer payments
  • B2B payments
  • Direct deposit
  • Healthcare/Insurance premiums
  • International ACH 
  • Same Day ACH

What Is The Difference Between ACH Credit and ACH Debit?

ACH payment methods have become popular for B2B transactions because they offer a fast, efficient, and cost-effective way to transfer funds. Distinguishing between the two main types of ACH comes down to whether you are pushing funds into an account or pulling funds out. 

ACH push and pull payments are differentiated by who initiates the transaction. In a push payment, the account holder initiates the transaction by sending funds to another account; in a pull payment, the recipient withdraws the funds from the account.

ACH Debit: Pulling money

As the merchant, you need to pay a supplier for a recent shipment of goods. You provide your supplier with your account and bank routing number and authorize your supplier to pull the payment through an ACH debit. It allows for a seamless transaction between businesses without needing physical checks or wire transfers.

ACH Credit: Pushing money

Imagine you are a business that sells products to various retailers. One of your retailers has a large order and wants to pay you electronically. You provide them with your account and bank routing number so that they can set up an ACH credit payment. This payment method allows your retailer to push the payment directly into your account, ensuring that you receive the funds quickly and securely.

With ACH credit, the retailer can easily send payment to you without the need for physical checks or wire transfers. By utilizing ACH credit, you can streamline your payment process and ensure that you receive timely payment for your goods and services.

Automated Clearing House Network And Nacha 

Since 1974, the Automated Clearing House (ACH) Network has been run by the National Automated Clearing House Association (also known as NACHA). Nacha governs the ACH network while acting as a rule writer within the payments space. 

The Automated Clearing House (ACH) Network is a secure and efficient system that allows for the electronic transfer of money and payment information between financial institution accounts. This network supports various payment methods such as direct debit, electronic funds transfer (EFT), and eCheck, providing a reliable means of transferring funds to and from all U.S. bank and credit union accounts.

It is important to note that although Nacha is not a government agency, it collaborates with government entities like the Federal Reserve and state banking authorities to ensure the security and reliability of electronic payment systems used by U.S. financial institutions.

Nacha plays a crucial role in overseeing the ACH Network and establishing the responsibilities and obligations of each participant. To prevent fraud, specific regulations have been implemented. For instance, ACH Originators of WEB debit entries are required to perform an account validation process. 

VoPay's advanced real-time bank account validation solution not only meets these requirements set by Nacha but surpasses them. You can learn more about VoPay's ACH micro-verification solution here. 

ACH Payments Canada: ACH Vs EFT 

EFT, or Electronic Funds Transfer, is a broad term predominantly used in Canada. It encompasses various methods of transferring funds electronically from one bank account to another. This includes transactions like direct deposits, wire transfers, and inter-bank transfers.

ACH, however, specifically refers to the network and process used for batch processing large volumes of credit and debit transactions in the U.S. financial system.

The primary distinction between the two systems lies in their operational specifics, particularly in the nuances of transaction processing. This includes differences in the format of payment files and the communication protocols between banks. While the ACH network is a central component of the U.S. financial landscape, in Canada, EFT is the more widely adopted method for electronic payments. This includes a variety of options tailored to both businesses and consumers.

Despite these differences, the overarching goal of both ACH and EFT systems remains the same: to facilitate fast, secure, and efficient electronic fund transfers.

How Does ACH Payment Processing Work?

To understand the behind-the-scenes of the Automated Clearing House (ACH) network payment processing, it helps to know the key players involved. 

The NACHA is the regulatory body governing ACH transactions. An ODFI is a financial institution from which an ACH transaction starts or originates, while an RDFI is an institution that receives an ACH transaction.

For example, in business-to-business ach transactions, the bank that holds an ISV company's merchant account (the ISV's payment gateway's bank) would be the originator/debtor financial institution (ODFI), while the customer's bank that receives payments from this ISV company would be the receiver/creditor financial institution (RCFI). A customer authorizes their business to debit their bank account on their behalf for single or recurring transactions.

Stepping Out The ACH Payment Process

  1. The recipient provides their banking information to the vendor via a paper check or an ACH authorization form. 
  2. The vendor then provides the recipient's banking information to their bank
  3. The vendor's bank sends the payment information to the ACH network
  4. The ACH network routes the payment to the recipient's bank
  5. Recipient's bank receives the payment: Once the recipient's bank receives the payment, the funds are deposited into the recipient's account.
  6. The vendor's bank account is debited for the amount of the payment.
  7. The recipient's account is credited for the amount of the payment.

Payment is complete: The payment is complete, and both parties have access to the funds.

The steps outlined above are common practices for ACH payment processing. It is typical for banks to use "batch processing" and process an entire day's worth of requests at once. This can mean a lengthier time to clear ( sometimes up to 5 days. 

However, with the introduction of payment technology and a burgeoning Fintech-as-a-Service space, the current process known for its labour-intensive processes gets a facelift with services such as VoPay. We offer multiple ACH payment solutions with a far simpler user experience. Plus, same-day processing makes it accessible and convenient to businesses of all sizes.

What You Need To Know About Current ACH Payment Practices

The steps outlined above are common practices for ACH payment processing. ACH payment services available through banks and credit unions are offered via an online banking service or through a file processing system. It is typical for banks to use this "batch processing" and process an entire day's worth of requests at once. This often means it will take much longer to clear. When a business must manually submit the transaction, it introduces a much higher risk of human error, not to mention there is zero visibility of payments through the entire payment cycle. 

In both methods, businesses need to manually submit the transaction, and it takes 3 to 5 business days to be cleared. Manually processing has a high risk of human error, not to mention there is zero visibility of payments through the cycle. 

Businesses and merchants transacting using traditional ACH payment methods often incur more NSFs and failed transactions, which can be costly. 

However, with the introduction of payment technology such as VoPay, the current labour-intensive process gets a significant upgrade. 

We offer multiple ACH payment solutions with: 

A far simpler user experience

Transaction visibility

Payment automation 

Enhanced security features 

Payment data and analytics

Account and fund validation

Faster processing

Plus, in some cases, Same-Day ACH payment processing.

Let's take a look at how these payments work and how companies use them. 

How To Make ACH Bank Payments With VoPay 

Enhance today's standard payment workflow with advanced ACH processing. 

Third-party payment processors like VoPay make connecting to the ACH Network and facilitating ACH transactions easier.  

We provide API endpoints that allow businesses to connect directly from their current platform. VoPay's Fintech-as-a-Service technology will enable organizations to streamline operations for more efficient cash flow management.  

VoPay's ACH payment service links businesses to the North American banking system, enabling them to accept, send, and bulk transfer payments online. VoPay processes standard and same-day ACH debit and credit transactions in compliance with procedures and standards set by NACHA.


  1. Payor (Originator) receives an authorization form from the Payee (Receiver)to debit funds from their bank account.
  2. Payor initiates the transaction using VoPay's API.
  3. VoPay forwards the transaction to the Payor's Bank (ODFI) for processing.
  4. ODFI submits the transaction to NACHA, and they forward it to the Payee's Bank (RDFI).
  5. Payee's bank debits the funds from the Payee's account.

How To Set Up One-time Or Recurring ACH Payments

Send payments directly to a vendor or supplier directly to their bank account

Collect payments directly from a client with rapid availability of funds

1. Create a VoPay Account

2. Collect the customer's bank account information using VoPay's simple iFrame experience that can be sent by email or embedded into an existing payment flow

3. Bank account information is tokenized for future use 

4. Set up single collections or recurring collections once you have successfully captured the bank account information 

5. Transaction updates can be monitored in the VoPay portal. Monthly transaction statements are accessible for easy reconciliation.

How Long Does ACH Payment Processing Take?

While the ACH Network processing time is getting faster and easier with every innovation, it can still take up to 3-5 business days. 

VoPay's Intelligent ACH payment solution ( iQ11™)  processing delivers faster results. 

Once an ACH transaction is initiated, it will follow the following timeline:

• Collecting payment: T + 1 business day for funds to arrive ( additional hold times may be added based on risk measures)

• Sending payment: same day or next day based on ACH service type used (same day ACH and standard ACH are both offered)

How Can I Use ACH Payments In My Business?

Here are a few more examples of ACH debit and credit use cases

  • Insurance Payouts
  • Supplier Payments
  • Mortgage repayments
  • Monthly Gym Subscription
  • Rental Income
  • Loan Issuance
  • Payroll
  • Gig Economy payments

ACH Payments Business Use Cases  

ACH payments have become a popular electronic payment method among organizations of all sizes thanks to their convenience, cost-effectiveness, and security. 

They are particularly beneficial for high-volume transactions and monthly recurring payments. 

Service-based businesses, like freelancers or consultants, find ACH payments a convenient and secure way for clients to pay without the hassle of paper checks or credit card fees. 

Lenders and loan management solutions rely on ACH payments to collect loan payments from borrowers, reducing the risk of missed or late payments while automating the payment process. 

The property management industry benefits from ACH payments, which offer tenants a convenient way to pay rent while reducing the risk of bounced checks or late payments. 

Subscription-based offerings, such as SaaS or membership-based organizations, find ACH payments a convenient and reliable way to collect recurring payments from customers, ensuring timely payments and reducing payment processing errors.

Top Benefits of B2B ACH Payments

The ways in which ACH payments are being used in today's industries are wide and varied, operating as an effective tool for companies of all types to streamline their payment processes and improve cash flow management.

Enterprises can expect the business benefits of ACH payments to have far-reaching effects throughout the entire organization.  

Faster processing times
A fraction of the processing costs
A reduction in NSFs
Stable cash flow
A significant decrease in operational FTE

VoPay ACH Payment API Technology 

We help digital enterprises scale their payment operations through a single API integration. We know payment technology is complex and expensive to build, so we designed ours so you don't have to. 

Get the most sophisticated payment infrastructure on the market.

Want to know more about VoPay and ACH payment? Schedule a demo of our ACH Payments platform today!

Developers: Need a single, advanced API for ACH Payment? Try our Sandbox Today! 

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