How ACH Payments Create An Effective Banking Channel

Consumers give businesses their account information so that businesses can debit their accounts. This is the way since the 1970s that the Automated Clearing House (ACH) payments have provided the means of electronically moving money between banks for private and commercial use. This then creates an effective banking channel.

Types of ACH

ACH payments are typically split between two primary categories: direct deposits and direct payments.

• A direct deposit is an all-encompassing payment that covers any form of deposit transfers made from businesses or governments to a consumer, such as a government benefit payment for example.
• A direct payment covers any funds required to make a payment. Such as someone making a payment for goods at the grocery store, or buying furniture from a department store, where the funds are directly debited from their account.

Both are of equal importance when it comes to understanding ACH payments; however, there are other notable means of transferring money via ACH.

• ACH credits happen when money is essentially pushed from one account fund to another. An example of this type of transfer would be an individual or business establishing payments with their bank in order to finance a recurring bill.
• ACH debits are where funds are “pulled” from an account; however, there are various separate kinds of ACH debits including BOC, ARC, and CTX. Examples would be recurring payments or standing orders with a bank, or with Back Office Conversion (BOC), when a consumer purchases a car via check, the transaction is then converted into an electronic ACH payment.

How popular is ACH now?

With approximately 8.2 billion payments being made over a four-month period when ACH payments were able to be same-day via a digital platform according to Payline Data, the demand for more efficient and secure means of paying and getting paid is undeniable.

ACH is often the underdog of the financial world in comparison to the vast availability of virtual cards, but it is still widely used by traditional institutions. The value of ACH transactions in 2019 grew more by $1 trillion for the seventh year running with a transaction increase of more than $1 billion according to Digital Transactions.

Companies such as Synapse offer white labeled products such as ACH that have the capability to transform the financial services that your business offers its customers by connecting to existing ACH accounts.

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