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ACH payments are like Emails for money between banks, the party receiving is initiating the transaction as opposed to the usual party giving the money creating the transaction. An ACH Credit is a push initiated by the party giving the money. Therefore, ACH payments is all based on a debit system where requests are being initiated by the vendors to its customers, and customers pay the ACH request. ACH debits are usually generated by institutions, where these institutions collect their ACH debits in batches and issue them up to 5 times a day. They arrive at the destination bank requesting to move money from a particular account, and all bank accounts are eligible to receive one.
The originating institutions must have the individual's bank details to issue an ACH transfer, and have the permissions associated to allow these direct debits to withdraw from your checking account. You have the bank details, the reason for the request, and the amount and are placed into a queue to be executed upon a certain date. There are checks to see if there are any errors from the ACH request, which then executes on your checking account, and may also trigger overdraft fees if it puts your balance below zero. Now that we covered what ACH payments are. Let's cover how they get used.
Usage of ACH payments
Recurring charge/fees: This is a flat rate on a recurring basis, like rent, car payment, insurance or home internet access, mobile phone bill, etc. This recurring payment is set up with the vendor to initiate a payment request at the same intervals (usually monthly).
Account Receivable Entry (ARE): When a paper check is received, it can be converted to an e-Check and can be then processed as an ACH transfer. Special scanners can pick up the barcode of the paper check to then be processed, and the initiator must hold onto the paper checks for up to 2 years.
Machine Transfer Entry (MTE): These requests take place at ATMs (Automated Teller Machine) and other machine-based requests. This makes obtaining your money quick and easy - a cash deposit is a credit, and a debit is taking cash out.
Point of Sale (POS): From a point of sale system such as a cash register, where you can sell products and take in an ACH payment such as a debit card, you are sending money from your checking account directly to the vendor's account using an ACH transfer request. Obviously, the Shopify POS can cater to this as well as your online store.
Web Initiated Entry (WE): This may be a recurring or single entry transaction request, and can apply to banks, credit cards, Google Pay, Apple Pay, and retailers. Given that it is a money transfer system, it can be applied as an online payment. This is applicable to online stores, and you can get a secure and rapid payment from your customers. These are streamlined payment methods and are at a much lower cost/rates than other forms of transactions.
Conclusions
As ACH payments get more widely used, the reduction of transactional issues also gets reduced. This makes this payment method the most effective and streamlined of all, as well as cost-effective. Shopify ACH payments are done through Stripe, which of course accepts Credit Cards as well. Given that most people do online banking to check their account balance, bill payments are more reliable as well as customers are more conscious of managing their assets. Offering ACH as a payment method only makes good sense given that it is part of the Shopify POS + Stripe capability. If you have any questions regarding your payment gateway, and how this payment method works, feel free to enquire with us at wish@thegenielab.com
