Accepting Automated Clearing House (ACH) payments can make your business accessible to more customers. ACH usage is climbing steadily: in 2024, there were 1.2 billion Same Day ACH payments, a 45% year-on-year growth rate. Despite many other technological advances in how people send and receive payments, more businesses are extending ACH as a payment option to their customers.

We'll explain how to accept ACH payments as a business, how much they cost and what the difference is between ACH payments and electronic transfers.

What's in this article?

• What are ACH payments and how do they benefit businesses?
  
• How to accept ACH Debits as a business
  
• How to accept ACH Credit Transfers as a business
  
• How do ACH payments work?
  
• How much do ACH transactions cost to process?
  
• Are ACH payments secure?
  
• ACH payments vs electronic transfers
  
• How Stripe Payments can help
  

What are ACH payments and how do they benefit businesses?

ACH stands for Automated Clearing House, which is an electronic payment system that facilitates the transfer of funds between banks and financial institutions. ACH provides a cost-effective alternative to paper cheques and electronic transfers and it is widely used by individuals, businesses and government entities to make and receive payments electronically.

ACH payments are transfers of funds between accounts at different financial institutions, made using the ACH network. ACH payments are a reliable, low-cost way for businesses to handle recurring transactions. They simplify cash flow management, reduce or eliminate the need for paper cheques and minimise processing delays. ACH also supports faster payments through Same Day ACH.

The ACH network supports a range of financial activities, including direct deposits, payroll management, vendor payments and personal transactions, such as bill payments and fund transfers.

Other types of ACH transactions include:

• Tax refunds
  
• Tax payments
  
• Retirement and investment account contributions
  
• Commercial purchases
  
• Charity donations
  
• University tuition payments
  
• Funds sent between family and friends
  

ACH transfers between your business and your customers can work in one of two ways:

ACH Debits

With ACH Debits, a business initiates the transfer of funds from the customer's bank account. The customer provides their bank sort code and account numbers to the business, which uses this information to set up the debit. These are commonly used for recurring payments, such as insurance premiums or mortgage payments.

ACH Credits

ACH Credits are initiated by a payer and transferred directly from their bank account to a payee's bank account, using the ACH network. They're basically the reverse of a debit, made using the same network. Credit transfers can be used for a variety of transactions, such as bill payments and online purchases.

How to accept ACH Debits as a business

Businesses must take a few additional steps to set up ACH Debits:

1. Add ACH payments support from your payment processing provider: Ensure your payments provider can facilitate ACH Debits and opt in to accepting them. Stripe customers can find more information about integrating ACH payments in this ACH Direct Debit guide.

2. Collect customers' bank details: After a customer selects ACH Direct Debit at checkout, they sign in to their bank account to provide their bank details.

3. Get consent from customers to initiate ACH payments drawn from their bank accounts: ACH Debits require customer authorisation, so you need to present customers with an ACH mandate. They accept it by completing the purchase.

Initiating an ACH Direct Debit through Stripe works in a similar way as other bank debits: The customer provides their banking details during checkout and gives the business permission to debit their account. Stripe makes it easy to accept Direct Debits with built-in account verification, optimised checkout surfaces and Stripe Financial Connections to let customers securely share their financial data with you.

How to accept ACH Credit Transfers as a business

Accepting ACH Credit Transfers involves different steps than ACH Debits since it's a push-based payment method. Here's how it works:

1. Enable ACH Credit Transfers: Ensure your payments provider can facilitate ACH Credit Transfers and opt in to accepting them. Stripe users can find more information about integrating ACH Credit Transfers here.

2. Offer ACH Credit Transfers as a payment method: Whether the customer is checking out online or paying via a payment link, you'll typically need to give them your business' sort code and bank account numbers. Link, a digital wallet built by Stripe, enables businesses to accept ACH Credit Transfers via Instant Bank Payments.

3. Have the customer authorise the transfer: The customer will initiate payment via their bank website, banking app or accounts payable system. If the customer is using Link's Instant Bank Payments option, Link will redirect them to their bank's website.

This method is a lighter lift for the business because the customer initiates the payment.

How do ACH payments work?

The following key players make ACH payments work:

• National Automated Clearing House Association (Nacha): Nacha is the organisation that oversees the governance and maintenance of the ACH network, sets its policies and manages ACH transfers.

• Originating Depository Financial Institution (ODFI): The ODFI is the banking institution that issues the ACH transfer request.

• Receiving Depository Financial Institution (RDFI): The RDFI is the banking institution that receives the ACH request.

To initiate an ACH transfer, the ODFI sends a request to the RDFI for the payment amount. The two banking institutions communicate to ensure adequate funds are available in order to complete the transaction. If the funds are available, the transfer is approved.

Unlike electronic transfers, which are most often handled in real time, one at a time, every ACH payment that is submitted within a given window of time is bundled together. Four times a day on business days, Nacha settles all outstanding ACH payments and the funds are sent to their final destination.

ACH payment processing time

Typically, ACH payments take one to three business days to process, depending on the bank and whether it's a standard or Same Day ACH transaction. Same Day ACH allows for faster settlement, often within the same business day, if initiated before the network cut-off time.

ACH payment rejection

ACH payments can be rejected due to insufficient funds, incorrect account details or a revoked authorisation from the customer. Banks may also reject payments for reasons such as closed accounts, account freezes or suspicious activity that triggers fraud prevention measures.

ACH penalty fees

ACH payments can come with penalty fees if a transaction fails. Common fees include NSF (non-sufficient funds) fees if the payer's account lacks enough money or return fees if incorrect banking details are provided. Some banks and payment processors may also charge administrative or reversal fees for handling failed or disputed ACH transactions.

How much do ACH payments cost to process?

Different payment processing providers and financial institutions charge businesses different fees to use ACH transfers as a payment method, but it's usually a small percentage of the total transaction amount with a maximum cap (e.g. a £5 maximum fee). Processing fees for ACH payments are generally much lower than credit card processing fees, which is especially beneficial for large transaction values.

You can find Stripe's pricing here.

Are ACH payments secure?

ACH payments are secured through multiple layers of protection, including bank-level encryption, authentication protocols and fraud detection systems. Businesses must comply with security standards from Nacha and, if applicable, the Payment Card Industry Data Security Standard (PCI DSS) when handling sensitive customer data. Platforms such as Stripe add additional safeguards by tokenising bank account information and monitoring transactions for suspicious activity, reducing the risk of fraud and unauthorised transfers.

ACH payments vs electronic transfers

While both ACH payments and electronic transfers carry funds between banks, they differ in certain ways. ACH Credit Transfers are similar to electronic transfers in that they're both push-based payment methods, while ACH Debits are initiated by the payee. Unlike ACH transfers, which go through the centralised Nacha network, electronic transfers travel through the Fedwire Funds Service, formerly known as the Federal Reserve Wire Network. The biggest upside to ACH payments is that they're typically much cheaper than electronic transfers.

Historically, electronic transfers were faster than ACH Debits and Credits. But as of 19 March 2021, Nacha changed its operating rules, and same-day settlement is now available for most ACH transactions. Since then, Same Day ACH usage has grown significantly, with 1.2 billion payments totalling $3.2 trillion in 2024.

How Stripe Payments can help

Stripe Payments enables businesses to set up and accept 100+ payment methods, including ACH Direct Debit and ACH Credit Transfers. It provides a unified, global payments solution that helps any business – from scaling startups to global enterprises – accept payments online, in person and around the world.

Stripe Payments can help you:

• Reconcile payments automatically: Easily reconcile ACH Credit Transfers to a specific payment or invoice with an automatic reconciliation engine that uses virtual bank accounts for each customer and tools for troubleshooting.
  
• Simplify refunds: Make refunds or return excess funds to the customer.
  
• Optimise your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs and Link, Stripe's digital wallet.
  
• Simplify verification: Instantly verify ACH Direct Debits or send micro-deposits to verify customers' bank account details within two business days.
  
• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multi-currency management with cross-border payment options, available in 195 countries across 135+ currencies.
  
• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalise interactions, reward loyalty, and grow revenue.
  
• Improve payments performance: Increase revenue with a range of customisable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.
  
• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% uptime and industry-leading reliability.
  

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.