What is an ACH Payment?
An ACH payment is any electronic payment that’s sent from one bank to another via the ACH (Automated Clearing House) network. This transaction is called an EFT, or electronic funds transfer.
Put simply, ACH payments let your customers transfer money directly from their bank account into yours. Often they’ll do this with an eCheck, which is a type of transaction that uses the ACH network. (Other ACH transactions include direct deposits, wire transfers, electronic benefits payments, and ACH disbursements.)
At this point, you may be thinking that an ACH payment seems a lot like a debit card payment, but these are actually two very different transactions. Not only do they have different processing times and transaction fees, but they’re processed through different merchant accounts and providers, and have their own chargeback and dispute resolution policies.
How Can I Accept ACH & eCheck Payments?
Here are the steps for accepting eCheck payments:
Set up an ACH merchant account. A merchant account lets you use the ACH network to withdraw payments directly from customers’ bank accounts. To open a merchant account, you’ll need to provide the following information: federal tax ID, the number of years you’ve been in business, and your estimated processing volume. Note that it can take a few days to be approved.
Request authorization from your customers. ACH billing requires authorization. Just as a customer must authorize you to cash a paper check by signing it, they must also authorize you to make an ACH (eCheck) withdrawal. They can do this by signing a contract or order form, submitting an online payment form, or agreeing to it in a recorded phone conversation.
Set up the payment details. The customer can submit an online payment form with their checking account and routing number, as well as the payment amount and whether it’s a one-time or recurring payment. Alternately, they can give you that information via a recorded phone conversation.
Submit the payment information. When you click “save” or “submit” in your payment processing software, it will start the ACH transaction.
What Do I Need to Know About Security?
The National Automated Clearing House Association (NACHA) oversees ACH security requirements and compels businesses to take steps to protect their customers and themselves. It's important to choose a payment processing partner that keeps your business and your customers safe.
PAYSIMPLE IS COMPLIANT WITH ALL ACH SECURITY RULES, INCLUDING:
Securing protected information. This includes sensitive information like financial accounts, social security numbers, driver’s license numbers, and other personal information customers provide.
Securing transmission. PaySimple uses the most current security protocols and 256-bit encryption for storing and transmitting bank account and credit card information.
Validating routing numbers. To prevent fraudulent transactions and errors, NACHA requires us to take “commercially reasonable” steps to check that routing numbers are accurate.
Verifying identity. NACHA requires merchants to verify customers’ identities prior to processing a transaction. This is important because phone or online ACH transactions only require a name, address, routing number, and account number—and these are readily available on any paper check.
Detecting fraud. NACHA requires merchants to flag any fraudulent transactions before they’re submitted into the ACH network for processing.
WHILE PAYSIMPLE DOES EVERYTHING POSSIBLE TO ENSURE YOUR AND YOUR CUSTOMERS’ SECURITY, YOU ALSO NEED TO BE PROACTIVE ABOUT SECURING SENSITIVE DATA. THIS MEANS:
Having a written security policy. NACHA rules require you to have a written security policy that protects the confidentiality and integrity of sensitive information, guards against potential security threats and hazards, and protects against unauthorized use of that information. This sample security policy should serve as a good starting point.
Using encryption and securing paper documents. Encrypt any electronic storage that contains bank account numbers and routing numbers. If you maintain paper documents with sensitive customer data, keep them in a secure place like a locked file drawer when they’re not in use.
Allowing employee access to customer records only when needed. Your employees should have access to protected customer information only if it’s required for a legitimate business need.
We hope you’ve enjoyed this simple but smart guide to ACH payments. If you’re ready to start accepting ACH & eCheck payments from your customers, we’d be happy to help get you set up. Please follow the link to learn more about PaySimple Merchant Accounts and how you can get started with one of your own!