Why ACH Payments are the Future: Trends and Opportunities for Resellers

Payment trends continue to focus on faster, more secure payments. Consumers want convenient payment options, businesses need efficient payment processing, and everyone wants a low-cost solution. Increased demand for embedded payments, cross-border transactions, and same-day processing push financial systems to develop new systems and processes. And yet, the growing sophistication of cybercriminals requires payment processors to strengthen their security defenses to ensure data security.

Automated clearing house (ACH) payments are leveraging their 50 years of experience to address the trends for more payment options, faster processing times, and robust cybersecurity defenses. Whether adding new payment types or increasing the processing frequency, the ACH payments network is positioned to be a leading payment solution for another 50 years and beyond.

New Technology

RealTime Payments (RTP) and FedNow are two systems that guarantee real-time account-to-account transfers 24 hours a day, 365 days a year. RTP launched in 2017 and processes transactions for about 25 financial institutions. FedNow is operated by the Federal Reserve and began operation in 2023.

While these new systems may seem to be the future of electronic payments, they have limitations:

• They are credit-based and the transaction originator must have an account with a financial institution on the network.
• There are no reversals; once the money is transferred, it’s gone.

For business use, the transaction is controlled by the consumer. For example, consumers would use their financial institution’s online banking or mobile app to originate an account-to-account transfer. If the originator does not have sufficient funds or if the business doesn’t have an account with the same bank, the transfer does not occur. The system does not allow merchants to initiate a debit to a consumer’s account.

Market Trends

Subscription-based business models, high-dollar transactions and e-commerce have helped to fuel the growth in ACH payments. Subscription-based businesses avoid denied transactions because of out-of-date information – bank accounts do not expire, and consumers are less likely to change bank accounts than they are credit cards. With ACH, these types of businesses have a reliable payment option.

More consumers are accustomed to using account-to-account transfers for internet purchases. And consumers and merchants alike appreciate the low-cost option of ACH transactions. This is one reason the transaction volume increased by 7.4% in the first quarter of 2024. Consumers are not paying credit card fees, and merchants are not paying the higher fees for credit card transactions.

Opportunities for Resellers

Resellers often approach ACH payments like credit cards, assuming that adding transaction fees would make their solution cost-prohibitive for most merchants. This is not the case for ACH payments that average between $0.25 and $0.50 per transaction. Resellers can add their own fees to transaction fee stack because ACH payments save merchants money while offering the following:

• Same Day ACH: The ACH network offers same-day ACH payments and performs batch processing three times daily.
• Less Fraud: Merchants wrestle with credit card fraud. Cybercriminals steal card numbers and make purchases that result in chargebacks. Not only are merchants out the cost of the service or merchandise, but they are also out the payment unless they have fraud protection. ACH processors such as VeriCheck provide fraud prevention tools to stop bogus account numbers or false identification.
• Enhanced Security: ACH processors must encrypt account information as well as personally identifiable information (PII) that is retained or transmitted. All ACH transactions are cleared before being sent to the designated financial institution.

With ACH payments, resellers can offer merchants same-day processing at a cost-effective price with a lower fraud risk.

Leveraging Technology for Innovation

The ACH network continually adds transaction types to support the changing payment landscape. They have expanded to include:

• Micro deposits: These are small deposits sent to an account to confirm its validity. They are typically less than $1.00 and are temporary.
• International payments: Often referred to as Cross-Border ACH, international payments are processed through the ACH network. Consumers and businesses can transfer funds between bank accounts in different countries.
• Check conversions: The ACH network allows merchants or individuals to convert a paper check into an ACH transaction electronically. Converting a check to an ACH transaction reduces processing time and eliminates a trip to the bank.
• Embedded payments: More online merchants are offering embedded purchases, allowing customers to pay without leaving the website or mobile application. resellers can leverage the ACH network to integrate payment solutions for their online customers.

The National Automated Clearing House Association (NACHA), the governing body for ACH transactions, works with financial institutions, merchants and processors to maintain a network that encourages efficient payment processing through innovation and technology.

Why ACH Payments are the Future

No one has a crystal ball that can accurately predict the future of electronic payments. However, knowing that the ACH network has existed for 50 years indicates its ability to adapt to an ever-changing landscape.  It has added transactions to keep up with mobile devices and the internet, which didn’t exist when it was founded in the 1970s.

Direct deposit through the ACH network began with the US Air Force and quickly moved to include Social Security payments in 1975. Today, 94% of Americans are paid through direct deposit, and 99% of SSA’s payments use direct deposit.

Check conversion has existed on the ACH network for almost 20 years. Today, digitizing checks at the point of capture has become a standard practice for many consumers and businesses. In 2001, the ACH payment system began accepting internet- and phone-initiated payments, allowing people to make payments electronically.

Throughout its history, the ACH infrastructure has kept pace with the increased transaction volumes. According to NACHA, 8.3 billion ACH payments were processed in the second quarter of 2024, a 6.3 % increase over 2023. The dollar value exceeded $21 trillion.

With its history of innovation, the ACH network provides a reliable payment processing option for merchants. It enables resellers to offer cost-effective payment processing with expanded transaction capabilities such as same-day ACH, electronic check conversion, and mobile payments.  If you are a reseller looking for ways to enhance your product offering while generating added revenue, contact VCI to discuss how to get started.