The use of paper checks is declining rapidly. A method of payment that was once considered hassle-free is now becoming irrelevant as consumer trends have moved towards the use of credit cards and debit cards. Another emerging trend in financial payments is ACH transfers, which further reduce the high processing cost associated with each transaction.
ACH translates for an Automated Clearing House system, an electronic financial network enabling the movement of funds between two bank accounts. This fluid transfer of money through ACH transfers is now considered the future of businesses because of its benefits.
Here are three reasons to shift to ACH so that you can be sure you are choosing the best transaction methods for your customers:
1. Low Transaction Cost
A Wall Street Journal study reported an individual spends $4 to $20 on average when writing a substantial check. This cost includes the printing expense, payment initiation, authorization costs, mailing cost, and the opportunity cost of the time spent. If your company only accepts this costly method of making a transaction, it can lose its consumers.
By providing the option of ACH transfers, you can ensure low processing fees compared to checks. Funds will get transferred amongst the two bank accounts (customer and your businesses) through a clearinghouse system, keeping the transaction costs minimum for both parties involved.
Since physical paper checks are not involved, ACH payments can save your team a considerable amount of time by eliminating the need to go to banks. This lets your employees spend their working hours on more productive tasks. In addition, an ACH settlement processes payments faster, shortening the time required to three to four business days, whereas a check can take five to six business days. As a result, you can ensure your savings by protecting your business from delays in cash inflows.
3. Higher Security
The estimate of the cost of data breaches was revealed to be $3.3 million per breach. The use of ACH payments allows businesses to cut out all intermediaries, thus significantly reducing the risk of tampering and fraud. ACH’s payment processing model carries out a two-way micro authentication process to confirm the authenticity of the accounts involved in the transaction. The processors will automatically make two micro-deposits of about $0.01 to $0.25 in your business and customer’s account. The customer will then be required to verify the exact amount to be sent. This verification process ensures two things for your business: the accuracy of account information of your customer and checking any transaction blocks on customers’ accounts.
Sending ACH payments also eliminates the security risks associated with traditional paper checks, making customers feel more secure about completing their transactions. Your data will also be protected from potential fraud within your organization itself.
ACH transfers are undoubtedly the future of business transactions. They are an ideal tool for businesses, especially those that run on a subscription-based model. They offer your company and your customers opportunities to save time, secure payments, and reap the maximum benefits of the convenience of electronic payments.