ACH Myths Busted: Clearing Up the Confusion on Clearing Houses
What’s the most valuable non-cash payment channel in the United States?
Most people would say credit cards—and most people would be wrong.
It turns out ACH (automated clearing house) is the most valuable non-cash payment channel. Even though there are more credit card than ACH payments each year, ACH payments are worth much more on average.
While credit cards account for almost 75% of non-cash payments, ACH payments account for 69% of the value of all non-cash payments. To put it another way, in 2020, ACH payments value reached approximately $62 trillion. And credit cards? Only $7.04 trillion.
So, why don’t ACH payments get the (ahem) credit they deserve? Despite existing for half a century, there are still some persistent ACH myths. These include ACH payments taking too long or being too hard to set up.
Here, we’ll explore three popular misconceptions about ACH and explain both why they persist and the truth about ACH processing.
Let’s dig into each of these myths in more detail.
ACH Myth 1: ACH Payments Aren’t Viable for One-Time Payments
Consumers don’t know what ACH is, but they know how it affects their lives. It’s often how they receive their paychecks (via direct deposit) or how they make recurring utilities or government payments.
Businesses are much more familiar with ACH payments, which can be made over credit or debit. But what they may not be aware of is how to use ACH for one-time payments—and how it can save them money. Given that bank account information is saved and high fees can add up over repeated transactions, the appeal of ACH for recurring payments is clear.
Consider large transactions worth hundreds of thousands of dollars or more. No one wants to pay a 2.5% processing fee when that amount climbs to five figures. If businesses choose to use ACH processing on the backend, that means lower fees for the end customer.
Whether for real estate purchases, medical billing, bulk supply orders, or other large purchases, the fee difference between ACH and other types of payment processing can be sufficient reason even if it is only once.
VERDICT: ACH payments are viable for recurring and one-time payments alike, especially when dealing with large transactions.
ACH Myth 2: Customers Don’t Want to Connect to Their Bank Accounts
You may have heard that most consumers are unwilling to enter bank account information and prefer to provide their credit card. This may be true for some, but given the growing adoption of digital wallets, making payments online can be much less work than writing a paper check. Instead of having to track and write out specific information each time, customers can choose a saved account to make a payment from.
While storing bank data can be a concern, more of your customers have their bank account information available than ever before. From a payee perspective, this simply looks like an automatic withdrawal from their account. When you choose to use ACH for your payment processing, you can benefit from the cost benefit of ACH processing without causing extra hassle for your customers. But convenience isn’t the only factor at play.
Even though consumers have become accustomed to processing and convenience fees, everyone likes saving money. When using ACH to power your payments, you can make transactions more profitable without passing the hidden fees associated with credit card payments onto them.
According to Jeff Kump, Head of Payments at CSG Forte, “We’ve heard from a number of clients that customers were happy to link their bank accounts, especially when it let them save money on fees for big purchases.”
VERDICT: Customers are happy to connect their bank accounts for ACH payments, even when the benefits are hidden in the backend.
ACH Myth 3: ACH Payments Always Take 3-5 Days to Process
ACH payments have a reputation for taking several days to process. Depending on the vendor, that can sometimes be the case, but it doesn’t have to be.
While many ACH processors do offer overnight and multi-day ACH processing, they can also process payments on the day they were made. According to the National Automated Clearing House Association (Nacha), there were approximately 604 million same-day ACH payments processed in 2021, a 70% increase over 2020. And the value of same-day ACH payments grew even more, reaching $944 billion in 2021 (more than double the value of payments in 2020).
To account for the growing volumes and values, Nacha recently increased the same-day ACH payment limit to $1 million. It seems likely that this trend will continue as the security and ease of same-day ACH payments are proven time and again.
Despite the convenience, only one vendor (CSG Forte) offers in-house same-day ACH capabilities. This isn’t to say that no other vendor offers same-day ACH capabilities, but only CSG Forte builds, maintains, and delivers this capability within the same organization.
VERDICT: While some ACH payments can still take several days, including those over $1 million or processed by certain vendors, it is possible to process ACH payments on the same day.
Confirmed: The Truth About ACH
ACH is a topic that can still be confusing, even for payments experts. We hope that this blog has cleared up a few of the most common myths about ACH payments. To recap:
- ACH is great for one-time and recurring payments alike.
- Customers have a low-effort way to connect their bank accounts for ACH payments.
- With the right vendor, ACH payments of up to $1 million can be transacted on the same day.
Here at CSG Forte, we believe that the payments experience can be simpler and more secure. Do you want to learn more about ACH and how it can help organizations like yours? Collect ACH payments cost-efficiently with CSG Forte.