Posted by NationalACH on Dec 07, 2011
ACH Payments

What are ACH Payments?

For over 40 years, ACH payments have been used for electronic funds transfer in the US. 

The ACH network began mainly as a way to pay large number of people with direct deposits from the federal government for benefit payments (such as Social Security) and for corporate payroll.  ACH credits were the primary use of the network

As ACH became popularized, use expanded to include one time and recurring payments as well as for ACH debits initiated on the web or by phone. 

ACH payment formats allow information about the payment to be transmitted along with the transaction, creating efficiencies for senders and receivers.  

According to the Federal Reserve, ACH makes up 18% of noncash retail payments (and 51% of their value)  The combination of low cost and information sent with payments has made ACH a crucial component for back-office settlement in many payment systems.

Pros & Cons of ACH Processing

Although the ACH system is highly effective, safe, and inexpensive, it does have certain drawbacks for internet merchants.  One of the biggest issues for online merchants is that the system is batch, not “real time”.

ACH transactions clear through the Federal Reserve at midnight, rather than when the actual sale is made.  This introduces an element of risk as, an echeck can “bounce” in the same way as a paper check can.

Because of the batch nature of ACH processing, merchants often wait a few days to ship a product to be sure the echeck has cleared and there are no returns. 

Low ticket items, such as digital or virtual goods, often require immediate fulfillment.  In these cases merchants frequently will go ahead and deliver the product digitally.  Because, even if the transaction bounces, the loss can easily be absorbed.


The ACH network is one of the oldest and most reliable electronic payment systems in the world. Millions of Americans regularly purchase goods and services through ACH. 

When you accept echecks, you capture sales from shoppers that don't have cards. And from buyers that are maxed out on cards. And many US consumers simply prefer to pay with an electronic check rather than a card.

Interested in ACH payment processing?

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