The Best Online ACH Payment Providers For eCommerce

If you collect payments online, your customers are likely accustomed to using credit or debit cards, PayPal, or even digital wallets such as Apple Pay or Google Pay. However, some of your customers may be quite open to authorizing a simple bank transfer via the good old ACH (Automated Clearing House) Network.

Paper checks are going the way of the dinosaur, but bank-to-bank transfers that bypass card networks such as Visa and Mastercard are alive and well. These ACH payments are commonly known as echecks, and you’re probably already paying some of your own personal or business bills this way. If you’ve used direct deposit to distribute or collect a paycheck, or have ever received a tax refund directly into your bank account from the IRS, you’ve definitely used the ACH Network. Perhaps it’s time to start accepting payments from your own customers through this method as well.

What’s in it for you? For starters, you could save yourself quite a bit of money. This is particularly noteworthy when compared to online credit card transactions. The fact that your customer’s card is not physically present to you during the online transaction means that you’re typically charged a higher processing rate than for in-person card payments. In-person payments use processing equipment to read the card information directly when it’s swiped or dipped, so it’s lower risk and lower cost than cards used online. On top of this, if you key-in a card payment yourself (for example, if you take the information over the phone), your card processing rate can bump even higher than for a regular ecommerce transaction over a website. For these reasons, ecommerce businesses and those who collect payments via phone, mail, or online invoices stand to save considerably when using the ACH system instead of cards.

We’re here to examine this cost-saving advantage of ACH payments and also to look at other benefits and drawbacks of accepting ACH/echecks — specifically for ecommerce businesses. We’ll describe how the ACH system works, how to get set up with ACH processing, and even recommend a few options for ACH payment providers to get you started.

What Is ACH?

As mentioned, ACH stands for Automated Clearing House. Originally developed to replace paper checks, the ACH Network connects banks all over the United States and facilitates large batches of direct electronic bank transfers between accounts. The ACH Network is completely separate from card networks such as Visa and Mastercard, and ACH transfers work quite differently from wire transfers as well. The ACH Network is governed by NACHA (formerly called the National Automated Clearing House Association), and all participating entities must abide by NACHA’s rules.

ACH payments must be authorized by the customer, so you need a way to collect important information, such as the customer name, bank name, account number, routing number, and the transfer amount. If your customer is submitting this information directly on a website or web form (versus over the phone), they may also check a box or e-sign the form stating they authorize the payment. The bank account must then be verified before the payment can go through. A good ACH payment provider should set you up with the tools you need to ensure all these steps happen as safely, properly, and automatically as possible.

For a more in-depth look at the mechanics of ACH payments, check out: Everything You Need to Know About Accepting ACH Payments.

Reasons To Offer ACH Payments To Customers

• Cost-Effective: ACH transactions are not subject to interchange and assessment fees charged by card-issuing banks and card networks like credit and debit card payments are, making ACH lower cost per transaction. This is especially true compared to credit cards but can also be true compared to debit cards, depending on the pricing model your card processor uses.
• Ideal For Recurring Billing: One-time payments also work just fine using ACH, but setting up ACH recurring billing is an excellent way to convert long-term customers to a less expensive payment method than cards.
• Fewer Failed Payments: Credit and debit cards frequently expire and card numbers change, causing you to lose recurring customers and revenue. Checking accounts, by contrast, don’t have expiration dates.
• More Payment Options: Some folks would simply rather pay you from a checking account than hand over credit card numbers, especially online. Others might not have credit cards in the first place and need another way to pay. ACH can also be set up as a secondary payment method if a card payment doesn’t go through.
• Difficult To Chargeback: There are only three very cut-and-dried reasons a customer can dispute an ACH charge, whereas a chargeback through plastic can be instigated essentially on a customer’s whim. Additionally, the time customers have to dispute an ACH transaction is about half as long as for cards. (Just also be aware that you can’t counter-dispute an ACH reversal — it is what it is.)
• Build A Processing History: Online merchants are more likely than in-person merchants to be classified as high-risk, to begin with, and some high-risk merchants may not be eligible to accept credit and debit cards. You might be able to set up high-risk ACH/echeck processing as an alternative, and then use your subsequent bank records to help you qualify for card acceptance at a later date.

When it comes to accepting payments over the internet, here are the types of businesses that usually benefit the most from adding ACH payment acceptance:

• Subscription products or services, including SaaS
• Recurring billing industries (e.g., property management, utilities, memberships, etc.)
• B2B operations
• Mail order and telephone order (MOTO) businesses
• Traditionally check-dependent industries
• High-risk industries
• Invoicing and accounting software users

ACH Payment Processing Times

ACH payments often take a bit longer to receive into your bank account than credit and debit card payments, so this is an important cash flow consideration. A slower process helps ensure that your business does not receive any payments that haven’t been verified by your customer’s bank, and it prevents your ACH processor from having to go back into your bank account to remove funds that were eventually returned as unavailable.

ACH debits (funds that are “pulled” or withdrawn from the customer’s bank account, often on a recurring basis) are required to settle the next business day. ACH credits (funds that are “pushed” to your account from the customer’s bank account) can take up to two business days. NACHA has recently implemented rules to speed up the process (known as the Same-Day ACH program), but not all businesses will see the fruits of these improvements — at least not for a few years yet.

Besides which, same-day processing and settlement do not equal same-day funding. Your bank and ACH payments provider ultimately determine the time period for ACH funds to become available in your account. This typically ranges from three to five business days from when the payment was initiated but can go even longer. Your bank may also have a set holding period for ACH funds that is decided on a business-by-business basis. At the same time, some ACH processors offer expedited funding for an additional fee.

The good news is that your bank can’t hold funds almost indefinitely like they can for a suspicious or uncharacteristically high card transaction. Either you’ll get your funds as expected, or there will be a return of the charge, all within a matter of days. You may value this peace of mind in knowing exactly where you stand relatively quickly, especially if you’ve been burned by funding holds in the past.

All this to say, talk to your bank and your ACH payments provider to confirm exactly when you can normally expect to receive ACH funds.

How To Find An eCommerce ACH Payment Provider

As a business that accepts payments online — through electronic invoices, a virtual terminal for keying-in payments, a website or web form, or any other methods — there are a few common pathways to setting up ACH payments.

Before we dive into these pathways, however, you should know about an important piece of software called a payment gateway. A payment gateway facilitates the secure transfer of payment data in an online transaction. If you accept ACH payments through a website or an electronic invoice, the gateway transmits the payment information your customers enter into the checkout page of your site over to the ACH Network. If you use a virtual terminal to key in payments over the phone, your gateway transmits the information entered into the terminal’s data input fields. Some payment gateways are designed specifically for card payments, others specifically for ACH payments, and others for a combination of multiple online payment methods.

In other words, you’ll need two primary components to accept ACH payments, which may or may not be provided by the same entity:

• a payment gateway (the software that transmits payment data)
• an ACH processing account that’s connected to your gateway

Below are a few of the most common ways merchants arrive at ACH payment acceptance:

Merchant Services Provider (MSP)

MSPs that set up merchant accounts for credit and debit card processing typically also partner with one or more specialized ACH payment providers to set up ACH accounts for clients. If you already have a good merchant account provider, you can start your ACH processing search here. Note that when bundled with credit card processing and other merchant services, you may get a better deal on ACH processing fees. Some MSPs even throw in ACH transactions for free! MSPs may also provide you with ACH processing on its own but usually only if you ask. Either way, ACH processing accounts have a separate underwriting process than your merchant account for credit cards. Your MSP can also connect you with an ACH-friendly payment gateway if you don’t already have one.

Any of our top online merchant account providers can set you up with ACH processing. High-risk businesses should also look into specialized echeck processing services through a high-risk merchant account provider.

Payment Service Provider (PSP)

PSPs (a.k.a., third-party processors, merchant aggregators) do not require you to be underwritten for your own dedicated merchant account for credit card processing or ACH processing. Instead, the PSP creates a communal merchant account on behalf of multiple merchants. There are advantages and disadvantages to using a third-party processor, but one nice benefit for online merchants is that the payment gateway software is typically already included with a PSP. Stripe is one example of an all-in-one PSP, with a built-in gateway that facilitates ACH transactions as well as card transactions. In other words, you don’t need to sign up for ACH processing separately. All you must do is enable and configure ACH processing within your main PSP account that you use to accept credit and debit. This may take a bit of technical know-how, but PSPs, such as Stripe, that are accustomed to dealing with online merchants usually have thorough documentation.

Standalone ACH Processor

If you’re not going to be setting up credit and debit card processing at all, you may want to find an ACH or echeck processor and sign up directly. Again, some high-risk ACH payment providers even specialize in layered echeck systems that supply extra fraud, chargeback, and bounced check protection.

Common ACH payment providers include:

• Payment Gateways: Some gateways can set you up with ACH processing by itself. For example, the popular Visa-owned gateway Authorize.Net acts as the merchant acquirer and underwriter of ACH accounts for its specialized eCheck.Net gateway service. Thus, Authorize.Net can act as your one-stop shop for ACH acceptance. This is in contrast to credit card processing with the main Authorize.Net gateway, in which you’ll need a separate, connected merchant account that is not underwritten by Authorize.Net.
• Business Bank Accounts: You can also go directly to a bank and sign up for an ACH processing account. The bank will underwrite your account and determine your rates and fees and then should point you toward a compatible payment gateway service.

Other Software Providers

If you’re using software that helps you run your online business (e.g., accounting, invoicing, booking, website building, subscription management or recurring billing software, etc.), ACH payment acceptance may be one of the additional services offered. Chances are that these companies have partnered with one or more payment gateways, MPSs or PSPs, and/or banks to set up payment acceptance for merchants. Occasionally, these companies provide their own gateway technologies and sometimes even provide the underwriting/merchant-acquiring services themselves. Although it’s generally okay to sign up through your existing software provider if you like the company, it’s still worth your time to investigate who is behind the scenes when it comes to payment processing — ACH or otherwise. Payment processing tends to be its own sort of animal with its own set of complex issues!

The Best Online ACH Payment Providers

Now that you know where to look for an ACH payment provider, how do you know if you’ve found a good one? Here are some important considerations and tips to guide you:

• Reasonable Rates: An ACH processing rate can come as a percentage, a flat fee per transaction, or both. In most cases, and especially as your transaction size increases, a flat fee beats a percentage charge. As mentioned, sometimes ACH transactions are even free if you’re already paying for credit card processing through the same company. Remember that your ACH rates should be lower than for credit card processing in the vast majority of cases!
• Reasonable Fees & Overall Cost: While rates are definitely important, don’t get too caught up in this one figure. Watch out for hefty application or setup fees, or a high annual or monthly fee for a service that provides little value for the price. Ask about the cost of any add-on products or services that may or may not be mandatory for your business as well as the charge for incidentals, such as ACH reversals and ACH returns. For more information on the types of fees to look out for, check out the pricing section of our ACH guide.
• Helpful Features: This depends on your business type and circumstances, so consider the features both you and your customers need most. Do you need a virtual terminal for manually entering MOTO transactions? An ACH gateway that handles complex recurring billing configurations? A gateway that comes pre-integrated with the shopping cart or website builder you’re already using? Auto-reconciliation of invoices or advanced reporting tools? Expedited deposits? A check guarantee or check verification service to protect yourself in a high-risk industry? Shop around to see what features are out there and avoid paying for extras that you don’t need.
• User-Friendly: Again, think about ease-of-use both from your own perspective and the perspective of your customers. Find out how much personalized help and/or support documentation is available for the initial deployment and ongoing troubleshooting of the system. How much tech-savvy do you need to work with your ACH gateway? Talk with your provider and ask to see examples of all the available tools in action.
• Advanced Integrations & Developer Tools: Some ACH payment providers not only integrate with websites and shopping carts but also integrate with services that automate and streamline authorization and bank verification for ACH. For example, Plaid is a popular ACH integration that facilitates authorization of funds and validation of bank accounts without requiring the customer to go look up an account or routing number. Meanwhile, if you work with a software developer to customize and run your website, we’d definitely recommend getting his or her opinion when deciding on an ACH service.

Final Thoughts: Are eCommerce ACH Payments Right For You?

The high cost of processing credit cards has long plagued both large and small businesses alike. Especially when compared to accepting card payments in-person, the cost of accepting plastic online can be particularly painful. Is it any wonder that direct bank-to-bank transfers that are batched and processed via the Automated Clearing House Network have steadily increased in popularity over the years, despite the arrival of newer, snazzier-sounding payment technologies onto the scene?

ACH payment acceptance is appealing to a wide variety of businesses that process payments online, particularly for those who have recurring billing or subscription customers. If you suspect a good portion of your repeat customers would prefer to pay with a direct online bank transfer versus a credit card or mailed check, you should definitely look into ACH acceptance. Not sure if they would be into it? Perhaps a quick survey of some of your current clients is in order.

If you’ve heard that receiving funds from ACH processing takes too long to be a viable option, it’s worth noting that ACH processing has sped up in recent years and should continue to get faster as time goes on. The exact timing is also highly variable depending on the ACH payment provider you choose as well and your own business circumstances. If, on the other hand, you’re worried about the potential clunkiness of the ACH process for your customers, you may want to look into add-on services that automate the authorization and bank verification processes. This helps stave off abandoned carts due to a checkout process with too much friction.

When looking for an ACH payment provider, we’d suggest starting with your current merchant account or payment gateway provider if you’re happy with that service. If you’re just getting started with an online business, we’d encourage you to be open to accepting as many payment methods as you can. The more options you provide, the better you’ll reach customers.