If you've ever paid a bill or received a paycheck through direct deposit, chances are you've used ACH (Automated Clearing House) payments. But what exactly is ACH payment, and how does it work? In this blog post, we'll cover the basics of ACH payments, including their meaning, how they differ from wire transfers, and how Cybrid uses ACH payments to facilitate transactions between funding accounts and on-platform FBO accounts.
What is an ACH Payment?
ACH payment is an electronic funds transfer (EFT) system that enables financial institutions to process payments in batches. ACH payments can be used for a wide range of transactions, including direct deposit of payroll, tax refunds, utility bills, and more. The process typically involves the following steps:
- The sender initiates a payment through their financial institution or payment processor.
- The payment details are transmitted to the ACH network, which sorts and routes the transaction to the appropriate receiving bank.
- The receiving bank credits the payment to the recipient's account.
ACH payments are typically faster and more cost-effective than paper checks, and they offer a high degree of security and reliability. ACH payments are widely used in the United States, with billions of transactions processed annually. According to NACHA, the organization that manages the ACH network, there were over 29 billion ACH payments made in the US in 2021, totaling over $72 trillion in value. [Source]
ACH vs. Wire Transfer
While both ACH and wire transfers are electronic payment methods, they differ in several key ways. ACH transfers are processed in batches and are typically used for low-value transactions, while wire transfers are sent and received in real-time and are typically used for high-value transactions. ACH transfers also have lower processing fees than wire transfers, making them a more cost-effective option for many businesses and consumers.
ACH Payment Processing Time
ACH payment processing times vary depending on the financial institutions involved and the specific details of the transaction. Generally, ACH payments take 1-3 business days to process, but some transactions may take longer. It's important to note that ACH payments are not processed on weekends or holidays, so transactions initiated on these days may take longer to complete.
How Cybrid Utilizes ACH Payments
At Cybrid, we use ACH payments to facilitate transactions between customer funding accounts and on-platform FBO (For Benefit Of) accounts for our embedded finance platform. When users add funds to their Cybrid accounts, they can choose to do so through ACH transfer, which allows them to easily and securely move money between their bank accounts and their Cybrid account. Once the funds are in their Cybrid account, users can use them to make crypto purchases, payments, and more. When users withdraw money from the platform, funds are routed via ACH to the connected funding account which reduces the chances of fraud by creating a closed product loop.
ACH payments are a critical component of Cybrid's platform, as they enable us to offer fast, secure, and cost-effective financial services to our users. By leveraging the power of ACH payments, we're able to help those that build with Cybrid achieve their goals and build a better financial future.