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Understanding ACH payments
For merchants expanding into the United States, few tools offer as much potential for operational efficiency as the ACH system. If your business already navigates international payment rails, understanding how Automated Clearing House (ACH) transfers work – and where they fit into your broader payment strategy – is worth your time.
What is an ACH payment?
ACH stands for Automated Clearing House, a US-based network that facilitates the electronic movement of money between bank accounts. Managed by the National Automated Clearing House Association (NACHA), the ACH network supports transactions such as payroll, bill payments, government benefits, and B2B transfers.
ACH transfers don't involve credit cards or physical checks. Instead, funds are moved directly between financial institutions in batches, making the system efficient and cost-effective. It's a preferred method for recurring payments and direct deposits within the US
How ACH payments work
An ACH transaction begins with an originator – this could be a company, an individual, or a government body – who requests a transfer via their bank, the Originating Depository Financial Institution (ODFI).
The process follows a specific flow:
- The originator submits transaction details (account and routing numbers, amount, etc.) to the ODFI.
- The ODFI forwards the data to an ACH operator, either the Federal Reserve or The Clearing House.
- The operator sorts and routes the transaction to the Receiving Depository Financial Institution (RDFI).
- The RDFI posts the credit or debit to the recipient's account.
This batch-based method processes transactions typically within 1-3 business days.
Types of ACH payments
ACH payments come in two primary forms:
|
Type |
Initiated by |
Typical use case |
|
Direct deposit |
Business/government |
Payroll, tax refunds |
|
Direct payment |
Consumer/business |
Bill payment, subscription charges |
Where ACH is useful for global merchants
Global businesses expanding into the US market can tap into ACH for several scenarios:
- Collecting subscription or membership payments from US-based customers
- Disbursing payments to US freelancers or vendors
- Receiving invoice payments from US-based clients
For example, a European SaaS platform billing monthly for US users can reduce card processing costs by routing through ACH instead.
ACH vs. other payment methods
|
Feature |
ACH transfer |
Wire transfer |
Credit card |
Real-time payments |
|
Speed |
1-3 days |
Same day to 1 day |
Instant |
Seconds |
|
Cost |
Low |
High |
Moderate-high |
Moderate |
|
Reversibility |
Possible |
Limited |
Dispute process |
Not reversible |
|
Use Case |
Recurring/B2B |
High-value, urgent |
Consumer purchase |
Small, instant |
ACH shines when cost control and predictability matter.
Benefits of ACH payments for global merchants
Why consider ACH as part of your US payment stack?
- Lower transaction fees than wire transfers or cards
- Predictable processing times (1-3 business days)
- Paperless setup that fits digital-first operations
- Reduced fraud risk due to strict authorisation rules
- Streamlined integration with accounting and ERP systems
- Sustainability benefit from eliminating paper checks
Key metrics to monitor with ACH
Tracking these will help assess performance and catch issues early:
- Return rates (failed payments)
- Time-to-settle (average duration from initiation to receipt)
- Percentage of manual interventions (e.g., disputes or reversals)
- Cost per transaction (all-in processing and operational costs)
Tips for making ACH work for your business
- Pre-validate account info to avoid payment rejections
- Use account updater tools if available
- Automate reconciliation through your payment provider
- Monitor for returns and put retry logic in place
- Plan communications for customers on recurring debits
Challenges of ACH payments
ACH isn't perfect. Here are some challenges:
- US-only system: ACH doesn't support cross-border payments directly.
- Risk of reversals: Payments can be disputed or returned due to errors or insufficient funds.
- Regulatory burden: Compliance with NACHA rules and US laws like the Electronic Fund Transfer Act (EFTA) is non-optional.
- Delayed visibility: Unlike instant methods, ACH lacks real-time transaction feedback.
When ACH might not be a fit
Avoid relying solely on ACH in these situations:
- Need for real-time settlement (e.g., flash sales or perishable goods)
- Cross-border funds movement
- High-risk verticals that require chargeback protection
Compliance checklist for ACH
- Validate and store authorisation forms securely
- Keep audit trails of all ACH entries
- Comply with NACHA formatting standards
- Encrypt sensitive data in transit and at rest
- Stay informed on regulatory updates (e.g., same-day ACH rule changes)
ACH for finance and payment leads
For CFOs and Heads of Payments, ACH can support strategic goals:
- Lowering cost of collections from US customers
- Improving cash flow predictability through recurring schedules
- Reducing currency conversion losses (for US dollar-based revenue)
- Simplifying reconciliation and reporting
Look for providers that offer unified dashboards, integration-ready APIs, and clear return code handling. If ACH is only one part of your US strategy, combine it with local acquiring and card acceptance for maximum reach.
Bottom line
ACH isn't a cure-all, but it plays a valuable role. For merchants entering the US or expanding their footprint, it can reduce costs, improve control, and provide customers with a trusted way to pay.
Want to learn how ACH fits into a larger payment strategy? Antom works with businesses of all sizes to support local methods like ACH and more than 300 others across Asia and beyond.
