The Automated Clearing House (ACH) Network is the United States’ electronic network for sending and receiving financial transactions. It was launched in the late 70s, in hopes of replacing paper checks and making payments within the United States much faster and more streamlined. Today, an estimated $40 Trillion USD flows through the ACH network annually. See Wikipedia for more history of ACH.
The ACH network clears transactions daily, meaning most transactions sent through the network arrive next business day. Payment Rails uses the ACH network to help US businesses pay their US-based contractors and suppliers. Recipients can be individuals or businesses.
Below are some frequently asked questions and answers when it comes to sending money via ACH:
What is required to send someone an ACH payment?
Before sending ACH payments, the sender needs to collect some information from the recipient. Payment Rails makes that task easy with our Recipient Widget, which is a white-label form that you can embed into your platform, or host on a white-label URL like yourcompany.portal.paymentrails.com.
The Recipient Widget securely collects banking info from Recipients and saves it in Payment Rails, while also validating that the banking information entered is correct. The needed information is:
- Recipient Type (Business vs Individual)
- Name (First Name and Last Name / Business Name)
- Street Address
- Routing/ABA Number
- Account Number
- Account Holder Name
The Recipient Widget means recipients can enter this information themselves and our clients don’t have to re-type or copy-and-paste this data.
Payment Rails won’t let you send a payment to a recipient until you’ve collected all the information needed for a successful transaction.
Why are ACH payments next business day?
Today, countries such as Canada, Australia, and countries in Europe have instant transfers between domestic bank accounts. Many people have come to expect transactions to be faster than one business day or instant. The ACH network has not had many changes since the late 1990s, therefore ACH transactions are still next business day, with a cutoff around the end of the business day 4PM or 3PM EST for most financial institutions.
There is a new network called, Real-Time Payments (RTP), that has launched in the US and is being adopted by major financial institutions. The RTP network is offered via The Clearing House (TCH) and is most similar to an "instant ACH network".
In addition to the RTP network, another means of instant payments is being offered via Visa and MasterCard using their debit card networks. This offering is called Visa Direct and MasterCard Send. Payments through this network can be send to an existing Visa or MasterCard debit card.
Payment Rails will begin to offer these options as payout methods soon, as demand grows.
These new, instant payout methods are currently a premium service in the US, and typically more costly than ACH. At the moment, most merchants pass these fees to recipients in exchange for convenience of receiving funds faster. It’s expected that the cost of RTP, Visa Direct, and MasterCard Send transactions will come down in the next few years as it is more widely adopted.
How do I send an ACH payment?
Payment Rails enables you to send ACH payments online (without visiting the bank), and automate ACH payments. Payment Rails also enables you to easily collect and validate payout information from the recipients. It can be integrated with the rest of your business processes & software (account systems, Google Sheets, etc), and it supports CSV uploads as well as manual entry of payout information.
Many businesses have access to an ACH payments portal via their online banking system. This is highly dependent on the type of account that the business has with the bank.
Some banking systems even have a CSV upload option to send multiple ACH payments at once. Banks will not help businesses collect banking information from recipients, so that will be up to you and your development team to collect and securely store that information.