Automated Clearing House (ACH) debit is a very commonly used payment method in many online stores. It involves withdrawing funds automatically from an account processed by an ACH processor. This gives it an advantage in efficiency over many other sorts of payment types.
As someone who runs a small business with an online component, it’s a very good idea to be able to accept ACH debit on your site – that much is certain. If your business doesn’t yet have an online component to sell its products or services, it should. The COVID-19 quarantine is causing online stores to become high-volume payment processors overnight while those who rely on in-person transactions are floundering. And even before the pandemic hit, the trend was already that business had already been rapidly moving online.
One issue you may encounter is that your business may be considered “high-risk” for ACH processing, which means that your business falls into a category that could make it difficult to obtain processing. Read on to learn about what high-risk ACH processing is and what you can do about it.
The definition of high-risk ACH processing
When your business is considered high risk for ACH processing, it means that one or more factors is increasing the statistical odds that your business will have a high rate of chargebacks on transactions. If customers are more likely to dispute charges to your business, this can increase the liability to your payment processor, because the processor has to pay the costs of those chargebacks even if they cannot recover those costs from you or your business.
This classification may occur because of one or more of many factors. Some factors that can contribute to this classification is your business’s prior processing history, the creditworthiness of the principals of the business, or the country where the business is located. Perhaps the most important factor, however, is what industry the business is in. For example, business in the pharmaceutical or gambling industries are automatically considered high-risk. If you choose the wrong payment processing company, this could make getting an online merchant account to process your customers’ ACH debit payments more difficult, or it could cause the rates you pay to be higher.
You may find yourself in a position where you’re considered high-risk for ACH processing. The question is, what can you do about it?
Reducing your risk
Those who find themselves at high risk for ACH processing still want to process their customers’ ACH debit cards, but often have to face high interchange rates from their merchant vendor. It may seem like something you have to write off as a loss, but there are steps you can take to mitigate the risk.
One solution is to improve some of the factors that are causing this classification. For example, having a single principal located in the United States who is able to sign on behalf of the business can oven be enough to overcome any problems related to the national location of the business. And if the company’s principals take any of the ordinary steps that can be undertaken to improve one’s credit score, that can also make a very big difference.
While it may not always be practical, some businesses can eliminate the portions of their business that are in a high-risk industry. For example, a sporting good store may be considered to be high-risk because it sells weapons, such has knives or guns, even if those sales are a very small part of the business’s sales. It may make economic sense to simply stop selling weapons in order to qualify for an ACH processing account that will not be counted as high-risk. Once a history of successful processing is established, it may even be possible to talk to your payment processor about reintroducing those products.
An alternative solution is to offer eCheck services on your site to take the load off the ACH debit payment processing. Signing up for an eCheck account, which enables you to accept check payments online or over the phone, is generally subject to far fewer restrictions than ACH processing accounts or credit card merchant accounts.
High-risk ACH processing can be harder to obtain and more costly for businesses that are in a challenging industry like gambling. eCheck services could reduce these costs by offering customers a way to bypass transaction fees associated with ACH debit processing.
Call (888) 924-2743 or visit Charge.com to work through your options and find the payment processing solution that works best for your business.