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ACH Remains Robust–But Providers Must Offer Optimized Speed, Risk, Control to Stand Out

May 17, 2023

Sending money electronically via the Automated Clearing House (ACH) network has become one of the most popular methods of moving money to and from bank accounts in the U.S.

A form of electronic funds transfer (EFT), ACH enables consumers and businesses to make and receive electronic payments securely and conveniently without involving credit card networks or wire transfers–both of which typically include higher processing fees.

But not all ACH is created equal. Payment providers seeking to offer their consumer and business customers best-in-class electronic funds transfer must ensure their offerings are designed to maximize ACH’s inherent advantages and mitigate traditional drawbacks, such as slower processing times. 

Providers who optimize ACH capabilities stand to gain a powerful competitive advantage by offering customers compelling differentiators around three key concepts: speed, risk and control. 

We’ll take a closer look at each of those concepts in future editions of our ACH blog series. But first, a quick primer on ACH as a whole and the payment network’s robust growth over the past few years.

What is ACH? The basics and recent volume surge.

Established in the 1970s, the Automated Clearing House network is governed by the National Automated Clearing House Association (NACHA), a nonprofit alliance of more than 9,000 financial institutions in the U.S. 

All U.S. banks and credit unions are connected to the ACH network, which means funds can be transferred directly between any two depository accounts via the network, with account and routing numbers used to direct and verify each transaction. 

Common types of ACH transactions include direct deposit of employee wages, peer-to-peer money transfer, bill payment, business supplier payments and government distributions, such as tax refunds and benefit payments. 

Driven by such use-cases, the popularity of ACH is booming. All in all, there were 30 billion ACH network transfers comprising a total of $76.7 trillion in 2022, the 10th consecutive year ACH payments volume grew by at least $1 trillion year-over-year. 

There are two types of ACH payments, depending on whether the party that initiates the transaction is requesting money from another account, or pushing funds to another account. 

The former, known as ACH debit, occurs when, for instance, a utility provider requests monthly payment from a customer who has authorized the transaction–on either a one-time or recurring basis–and given the provider their bank account and routing number. 

The latter, called ACH credit, occurs when an account holder issues a request to send money from their account to another account, such as a business transferring an employee’s wages directly from the company’s bank account to that employee’s checking account on a recurring basis. 

While both of the above examples involve payments between a business and a consumer, ACH has been growing particularly fast in the business-to-business sector, as companies of all sizes have sought to take advantage of the cost and efficiency benefits of ACH.

According to NACHA, the number of B2B payments made via the ACH network increased by 11.8 percent year-over-year in 2022, to 5.9 billion transactions worth a total of $52.5 trillion.

Companies ranging from small and midsize businesses to large enterprises increasingly are prioritizing cost savings amid the current business challenges driven by macroeconomic uncertainties. Amid the current environment, the generally lower fees of ACH transactions compared to other electronic payment types, such as credit and debit cards and wire transfer, offer a particularly attractive combination of cost savings and convenience. 

Now that we’ve established a baseline understanding about ACH payments at large and their application for consumers and businesses, stay tuned for future installments of this blog series, in which we’ll detail the three key ways payment providers can optimize their ACH offerings to drive value for end-users–speed, risk and control.

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