High Risk ACH Payment Processing
In today’s market, operating without accepting debit or credit cards has become virtually impossible for merchants. Businesses need to find a reliable payment processor in order to accept the ‘plastic’. While finding such a merchant account provider is easier for most businesses, those that are labeled high-risk have to face several challenges and for them, getting approved for a processing account can be very frustrating. Fortunately, high-risk businesses have a suitable option i.e.. In fact, the many changes to ACH transactions over the years have made them an ideal option for these businesses.
What Are ACH Transactions?
ACH stands for Automated Clearing House. It is an electronic system that has been designed to allow businesses and consumers to both send and receive funds by performing bank-to-bank transactions. ACH transactions are governed and regulated by the National Automated Clearing House Association (NACHA). NACHA is one of the biggest banking systems in the world, processing billions of ACH transactions every year.
ACH payments are used to pay bills online, have your health insurance company send money to your doctor, send your kids money on Venmo, or receive your paycheck via direct deposit. ACH payments are fast and efficient since they electronically transfer funds from bank to bank. Because of this, ACH eliminates the manual task of printing or writing a check, mailing it, and then depositing it into your bank account.
How Do ACH Payments Work?
There are two primary ways ACH payments work: push and pull:
- An ACH push occurs when the account holder initiates the fund transfer. In this scenario, the business or person makes the purchase. Account holder pushes the funds from their bank account to the payment processing system or bank of the business. ACH push payments are also commonly known as ACH credit payments.
- An ACH pull occurs when a business or person receiving the funds initiates the fund transfer. A good example of ACH pull is the automatic billing for monthly subscriptions or deliveries. Each month on a specified date, funds from the consumer’s account are automatically pulled via an ACH pull transaction. These payments are also commonly known as ACH debit transactions.
How Do High Risk Ach Payments Compare to Other Transaction Methods?
Currently, high risk ach payment processing accounts for about 30% of all the transactions. Check is still one of the most popular ways to pay invoices. The problem with mailing checks is that it is a relatively slower process which sometimes takes up to a week in order to receive the check. This makes it quite difficult to estimate a budget for your business. The system for mailing and processing checks also leaves businesses open to cyber hacking and fraud, hence increasing risk. Not to mention check processing also makes the operations of a business more difficult.
While some businesses prefer to choose this time-consuming process as they want to keep proper records of any sales or expenses, many companies use credit cards to accept and pay vendors. If you use credit card to pay your vendors, you carry that balance until the payment is made in full. Hence, it’s not surprising to know that heavy credit card use can get businesses and individuals in trouble.
However, if there no funds available on a credit card, the vendor knows instantly. On the other hand, finding that ACH funds aren’t available may take a few days for a vendor, hence creating lag in transactions. Apart from this, ACH payments are more secure as compared to credit cards and checks that are generally more exposed to fraud and theft.
What is the Fraud Rate of ACH Payments?
As mentioned above, ACH transactions are more secure as compared to credit cards and checks. In fact, ACH transactions have the lowest fraud rate of any payment method. According to a survey, only 8 cents out of $10,000 are prone to fraud when it comes to ACH transactions. On the other hand, debit and credit card fraud has increased over the years.
What Are the Advantages of ACH Payments?
There are many advantages of ACH payments for companies and businesses. Some of the key benefits include the following:
- Easy to Handle: When customers use check as a payment method, companies have to wait for days for the mail to arrive. And once it arrives, there is an additional step of depositing the check with the bank. Sometimes, payments get lost and it can be labor-intensive to enter those payments into their bookkeeping system. ACH payments arrive reliably and quickly, and there’s no hassle of forwarding every check to the bank and then waiting for days to find out whether it has bounced.
- Less Expensive Than Plastic: Taking a credit card payment costs more than processing an ACH transfer, particularly when you are collecting several recurring payments. In such scenarios, savings made by ACH transfer add up.
- Long-distance Payments: With ACH, you can accept payments remotely, even though you can do that with credit cards as well. However, if your customers don’t have credit cards or they don’t want to provide their card information on regular basis, ACH can offer a better solution.
How a Business Can Start Accepting ACH Payments
Getting set up to accept ACH payments is a straightforward process. It includes the following steps:
- First, you need to select a reliable high-risk ACH processor. Start by comparing the features and fees of various high-risk merchant account providers.
- Once you have chosen your payments partner, you will need to complete their application to set up an account with them.
- It is recommended that you carefully read the terms and conditions of your merchant services provider, so that you clearly understand the extent of your partnership. Understanding different type of ACH payments is also recommended.
- Next, ask your customers to sign an ACH authorization form.
- After that, have customers submit their routing number and checking account details via an online form.
- Finally, submit or save the payment information with the payment processor to initiate the ACH transaction.
High Risk ACH Payment Processing has become very popular because more and more banks are now offering same-day ACH transaction processing. The security and speed of ACH processing along with its ease of use make this form of payment promising to high-risk businesses – small and big.