eCommerce Glossary
This e-commerce glossary features over 250 essential terms every online seller should know to succeed in digital commerce.
An ACH payment (Automated Clearing House payment) is an electronic fund transfer that moves money directly from one bank account to another via the ACH network. This payment system eliminates the need for physical checks, cash, or credit card transactions, offering a secure and efficient way to send and receive money.
ACH payments are commonly used by businesses and individuals for recurring transactions such as direct deposit payroll, vendor payments, subscription billing, and utility bills. As a key part of electronic banking, ACH payments contribute to faster, paperless financial operations.
How ACH Payment Works
- Initiation: The sender initiates the ACH payment by providing the necessary banking details and authorizing the transfer.
- Submission to ACH Network: The sender’s bank submits the payment information to the ACH network, which acts as a central hub for processing electronic transactions.
- Processing by ACH Network: The ACH network processes the transaction, verifying the sender’s account balance and routing the funds to the recipient’s bank.
- Notification to Recipient’s Bank: The recipient’s bank receives notification of the incoming funds and credits the recipient’s account.
- Availability of Funds: Once the funds are credited to the recipient’s account, they become available for use. This typically occurs within one to two business days from the initiation of the payment.
Benefits of ACH Payment
- ACH payments offer multiple advantages:
- Cost-effective: Lower processing fees compared to wire transfers or credit cards.
- Reliable: Ideal for recurring payments like salaries or rent.
- Secure: Fewer risks compared to handling checks or cash.
- Convenient: Automates payment processes and reduces manual work.
ACH payments offer a convenient and efficient way to transfer funds between bank accounts, with shorter processing times compared to traditional paper-based methods. Additionally, ACH payments are widely used for various purposes, including payroll deposits, bill payments, and business-to-business transactions, contributing to the seamless flow of funds in the financial ecosystem.