ACH stands for Automated Clearing House and it is an electronic payment delivery system for individuals and businesses within the US. The ACH is typically linked to a merchant account, and a business will use it to send or receive money to and from a variety of accounts on a recurring basis. It is a great alternative to credit card payments especially when it comes to business to business (B2B) transactions; however, business to consumer (B2C) transactions are seeing an uptick lately as well.
The basics of ACH
ACH goes by several different names including ECP, electronic bill payment, automatic debit and echeck. One of its most commonly known uses is salary distribution. Employers use the ACH in order to transfer funds into their employees’ bank accounts. Consumers can take advantage of ACH capabilities in order to make recurring payments for bills and mortgages.
B2B and B2C usage
According to the National Automated Clearing House, which is part of the Electronics Payments Association, ACH transaction volume saw a growth of 5.6%, or 1.3 billion, payments in just one recent year. A part of this was consumer usage, which saw an uptick due to convenience and the desire to avoid using credit cards. ACH is seen as a way to better manage the personal budget, as opposed to the credit card, which allows a user to overspend. Payments made through the ACH are cleared only if funds are available in the customer’s account.
When it comes to B2B, ACH is the preferred method of payment because it does not have the same limitations as a credit card. In the B2B world, large ticket items are often sold and bought, and they can exceed even the largest credit card payment limit. ACH can be a great alternative for vendors that sell big ticket items. Once again, vendors need to keep this in mind, because if you sell large ticket items or bill monthly for a large number of sales, this may be the best option for receiving your payment quickly and reliably.
With new payment methods coming about, ACH will face competition in the future, but the prospects are looking good for this payment method. Due to its benefits and convenience, it will continue to be a major player in the B2B world, and it is expected to have a growing impact with consumers as well. As a vendor with or without a merchant account, it’s a good idea to at least lay the groundwork for ACH implementation.
For more information how ACH can help your B2B/B2C company, or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.