What is ACH payment technology?

February 22, 2023
If you've ever processed a paycheck through direct deposit or cleared a utility bill, it's likely you've employed the convenience of Automated Clearing House (ACH) payments. But what does this term really imply, and how does it function in the financial ecosystem? In this updated blog post, we will demystify the concept of ACH payments, explore their unique benefits, and reveal how Cybrid utilizes ACH payment technology to streamline transactions between funding accounts and on-platform FBO accounts.
Decoding ACH Payments
An ACH payment is an Electronic Funds Transfer (EFT) system that empowers financial institutions to process payments in organized batches. Ranging from payroll direct deposits to tax refunds and bill payments, the versatility of ACH payments is boundless. Here's a brief outline of the typical process:
- A payment is initiated by the sender through their bank or payment processor.
- Details of this payment are transferred to the ACH network, which segregates and directs the transaction to the relevant recipient's bank.
- The recipient's bank acknowledges the payment, crediting it to the recipient's account.
The efficiency, cost-effectiveness, and enhanced security of ACH payments over traditional paper checks, most importantly, these payments enjoy vast popularity, especially in the United States. According to NACHA, the governing body of the ACH network, in 2021 alone, over 29 billion ACH payments, amounting to a staggering value of over $72 trillion, were processed in the US.
ACH vs. Wire Transfer
Though both ACH and wire transfers constitute electronic payment modes, they exhibit significant differences. While ACH transfers are batch-processed and are ideal for smaller transactions, wire transfers are designed for high-value transactions, offering real-time processing. In addition, ACH transfers trump wire transfers when it comes to processing fees, making them a more economical choice for businesses and individuals alike.
ACH vs. Real-Time Payments
Both ACH and Real-Time Payments (RTP) are popular forms of electronic funds transfers, yet they serve different purposes based on the immediacy and nature of transactions.
ACH payments are a tried-and-tested method used across many transaction types due to their safety and efficiency. They process electronic payments in batches, typically taking 1-3 business days, and they do not operate on weekends or holidays.
Conversely, Real-Time Payments (RTP) represent a more recent payment system innovation. RTP delivers funds almost instantaneously and operates 24/7, making it highly valuable for time-sensitive or urgent payments. An additional advantage of RTP is its provision of immediate confirmation upon transaction completion, enhancing the peace of mind for both sender and recipient.
At Cybrid, we understand the unique value of both these payment types. Our platform, thus, integrates both ACH and RTP, catering to the diverse needs of businesses and individuals. By offering these varied payment systems, we ensure our users have access to the most efficient, cost-effective, and timely transaction options that align with their specific requirements.
ACH Payment Processing Duration
The processing time for ACH payments depends on the participating financial institutions and the specifics of the transaction. Although most ACH payments are processed within 1-3 business days, certain transactions may take longer. It's essential to note that weekends and holidays are off-limits for ACH payments, leading to extended processing times for transactions initiated during these periods.
Cybrid and ACH Payments
At Cybrid, we employ ACH payments to enable transactions between our customer's funding accounts and the on-platform For Benefit Of (FBO) accounts within our embedded finance platform. Our users can conveniently top up their Cybrid accounts via ACH transfers, empowering them to securely transfer funds from their bank accounts to their Cybrid accounts. Once the funds reflect in their Cybrid account, they can engage in a host of activities like making crypto payments, purchases, and more. Withdrawals from the platform are facilitated via ACH to the connected funding account, minimizing fraud potential by establishing a closed product loop.
ACH payments form an integral part of Cybrid's platform, enabling us to provide secure, swift, and affordable financial services to our users. Harnessing the potential of ACH payments, we empower businesses using the Cybrid platform to achieve their goals and forge a robust financial future in the world of global payments.