What is an ACH Payment?

Automated Clearing House (ACH) is a major electronic network operating in the United States for transferring money. In contrast to wire transfers or credit card transactions, which are processed one at a time, ACH transactions are processed in batches throughout the business day.

1. Autorisation: Customer provides their bank routing and account numbers to the SaaS platform and signs a digital mandate.
2. Origination: The SaaS provider’s bank (ODFI) gathers these payment requests and sends them in a batch file to a clearing house.
3. Clearing and Routing: The Federal Reserve or The Clearing House separates the entries and sends them to the customer’s bank (RDFI).
4. Règlement: Bank confirms the availability of funds and settles the transfer within 1 to 3 business days.

ACH transfers are often used for the recurring revenue model common in SaaS businesses. They are primarily used to renew monthly or annual subscriptions for B2B clients.

Going a step further, these payment methods enable usage-based billing, which “zeroes in” on a customer’s usage and charges it to their bank account. The removal of manual invoicing could impact the speed of payments received by merchants on high-value contracts, enabling them to bypass the standard 3% credit card fee.

While both transfer money between financial institutions, they serve very different roles in a SaaS billing strategy. 

NACHA (National Automated Clearing House Association) operating rules govern ACH payments, which are often categorized as a relatively secure payment method. Because bank account numbers do not change often, they are less vulnerable to stolen or lost card types of fraude that banks must deal with daily.

•   Durée: Observed differences in payment failure frequencies could be related to the contrasting expiration conventions for bank details and credit cards.
•   Verification: Current SaaS products often utilize d'API to verify bank account ownership rapidly, potentially reducing instances of ‘unauthorized’ return codes.
•   Reversibility: The fact that the business-to-business (B2B) contesting window is much shorter and stricter than that of consumer credit card rejets de débit means that both options have their pros and cons.

Whether to use ACH or other methods depends on the amount of money transacted, the type of customer, and the available time.

•   Payment amounts exceeding $100 may correlate with increased ACH usage when compared to convenience options.
•   The ACH system is often used in B2B relationships involving les paiements récurrents over an extended period.
•   ACH transactions are primarily used within the U.S.; international customers may require consideration of payment alternatives like SEPA (Europe) or global wire transfers.