A new method to make payments has been sweeping the commercial landscape in recent years as more and more businesses choose to change their payment processes. This new method is known as ACH payments – ACH stands for Automated Clearing House – an electronic payment network that completely eliminates the need for paper checkbooks and overpriced credit and debit card transactions. As time has progressed, physical checks have become more and more time-consuming and irrelevant in the fast and efficient face of the commercial industry. They tend to be unreliable, less secure, and no longer have the priority that ACH payments have. Wire transfers, whilst not succumbing to the time or security risks of paper checks, still have worryingly large transaction processing fees that make it very difficult for an active business to afford without losing out on a lot.
But what is ACH payment, how is it different from the traditional methods, and why should businesses start adopting it as the newest method? ACH, as said before, is a network that automatically handles transactions and payments through what’s commonly called eChecks. Using an electronic payment network means that all of the transactions can be handled without having to go through any human interaction, or having to go through the post. ACH is also much cheaper than other transaction methods. This article will take an in-depth look at the ACH payment system and how it is impacting the commercial landscape.
Greater Security
Security is often the first thing people think about when it comes to transactions. No one wants their bank details spread into the wider internet, nor do they want to find out that their payments were intercepted whilst in transport, whether accidentally or on purpose. Especially in the digital age, where almost everything we do is online and public, transactions, especially on a commercial level, need to be incredibly safe and secure. Paper checks can easily be lost in the post, even with today’s tight standards. Worse, paper checks need to be processed through several different people before being cashed. This means there are several points of contact where human error could occur, leading to payments going to the wrong place. Worse, this provides a large number of points where tampering or forgery could take place. Though this isn’t a hugely common issue, when a business is processing vast numbers of transactions at a time this can become more and more of a rising threat.
ACH payments go through a central network, where the details of the transaction are never seen by a human individual. This means that your transactions are discreet and, most importantly, safe and secure. Through this automated system, checks cannot simply be lost or tampered with, they just go from your business to the customer and vice versa in a clean, closed network.
Improved Processing Speeds
Paper checks are burdened by a number of tasks that take up time, which inevitably slows down the entire process. Even if it’s a few hours, it’s a few hours per transaction you need to make. This soon adds up and slows down the entire company’s progress. Paper checks need to be posted, checked by hand then processed in a system that can take days. Moreover, the intermediaries are prone to making mistakes that can delay your transaction even more than it would be originally, or even lose the physical check, forcing you to write a new one and begin waiting again. ACH payments make sure that this wait time is almost entirely cut out. No intermediaries mean no human error, so no delays nor having to re-input the transaction. A boon to the ACH network is that banks tend to favor these transactions too, so they are frequently processed before physical checks are. This means you cut down on all of your timings by a huge margin, stopping payments from taking up such a large portion of your workweek.
Low Costs
As mentioned above, wire transfers for businesses often have a huge processing fee as the fee is equal to a percentage of the transaction. This causes issues for businesses built on subscription systems or companies that sell a large number of individual products, decreasing the margin of profit by costing so much in fees. On the other hand, whilst paper checks cost the least, the amount of labor and time they cost to process means that ACH payments again come out on top as the fastest low-cost option. The low processing fees of ACH payments are fantastic for all businesses, but the ones that benefit the most tend to be those that are subscription-based, as the ACH network has excellent support for recurring payments. This means that most of the time consumer bills will come through on time, and when they don’t, there will be plenty of money to cover it as there is so much less going to processing fees.
It seems that ACH payments are going to become the predominant method of payment for large and small businesses alike thanks to its versatility, cost-effectiveness, and ease of use, as well as providing a base for good transactions in the age of the internet. Physical checks are out, and the eCheck is in.
