ACH processing refers to the moving of money electronically using the Federal Government’s Automated Clearing house. This clearing house provides a centralized communication network that allows for both the electronic transfers of funds and the reporting of these transfers.
Essentially banks have a pipeline (usually called a Fed Line) that connects them directly into the ACH network. This pipeline allows information to be transmitted that instructs the clearing house to transfer funds to and from bank accounts. The banks typically receive raw data reporting bank from the Federal Reserve ACH system. (Note: There are private clearing houses as well).
Most banks possess at least the ability to use a Fed Line. Some make use of this and some don’t. Those that do typically have very limited front end tools. By front end we mean methods of getting transaction data to them. Their reporting systems tend to be even more primitive.
For these reasons third party processors (TPP’s) entered the ACH arena. The third party processor saw the myriad benefits and opportunities to provide businesses the ability to easily move money electronically. By developing user friendly front end tools and robust reporting the third party processor has been able to offer businesses tools they need. The vast majority of TPP’s have a partner bank(s) and they tie into that bank’s Fed Line.
If you are familiar with credit card processing you may assume ACH processing operates in a similar fashion. It doesn’t. Whereby a credit card transaction places a hold on available credit on the customer card an ACH transaction is quite different.
The ACH transaction proceeds as if the customer being debited has a valid bank account with the requisite funds available. The TPP typically receives provisional credit for the ACH transaction the day after the transaction is initiated. The two banks involved in the transaction (TPP bank and customer bank) have up to 4 days to “settle” the transaction. Settlement refers to the banks agreement that the money has been transferred.
Most of the time the transaction is “settled”. However there are a variety of reasons it may “reject” or become a “return”.
NSF, closed account, invalid account are some of the many reasons. You also have the potential (as in a credit card transaction) of a chargeback by the consumer.
For the reasons detailed above the TPP typically imposes a 4 day hold on funds to mitigate the risk they would be exposed to if they gave faster credit. Here is a risk scenario. A business is credited $10k on Wednesday for transactions performed on Monday. Return information comes form the customer bank and the bottom line is that $5k was “returned”. That $5k has to be debited from the business that initiated the transaction. If the TPP is unable to get that $5k they are on the hook. This goes to the heart of risk mitigation.
In summary ACH processing is not an instantaneous transfer of funds. Most of the time you will find out through your reporting within 48 hours if the transactions is going to result in a “return”. You can use our advanced verification products to reduce your exposure to potentially unsuccessful transactions. In conjunction with advanced recollection techniques you can enjoy efficient payment processing.
If your business possesses an IT staff and sufficient transaction we can in cases provide you a direct relationship with a bank with a Fed Line. Contact us for details.
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When carefully planned, and with the right partner, software/asp providers that integrate API payment solutions can realize multiple benefits:
More comprehensive product
Revenue streams
Cross selling opportunities
Offloading payment compliance burdens
There’s a huge difference in just providing payment API tools and IT support versus what ACH Payments provides. We more than go the extra mile for our software vertical partners. These things aren’t typically seen at the outset when choosing a payment solution provider, but they’re cornerstone to a long-term, successful payments integration. Here’s a few as food for thought:
We have provided developments to work in concert with other third party software to tie into our software vertical partner’s applications, resulting in greater satisfaction of the software vertical partner’s customer base.
We have provided mobile development applications that communicate with specific requirements the software vertical partner requires. The end result is that the software partner receives an application that works specifically with their systems and the customers that use them, all courtesy of ACH Payments.
We’re visible for integration partners. We routinely attend our partner’s conferences to answer questions, speak about upcoming developments and gather their customer’s needs for future developments.
We give back. We routinely sponsor conference dinners and provide door prizes like iPad’s, or even pro-bono development work to the integration partner’s customers, and the big winner is our integrated partner from the satisfied clients created.
We establish specific marketing plans for electronic payment adoption towards the consumer base. We gather data, communicate with the software end-users, and then develop plans to increase revenue efficiency.
Have we mentioned revenue share? Of course we can devise great revenue sharing partnerships. It’s been a core focus for years. In fact, we have some software vertical clients who receive a very nice contribution from us towards their bottom line.
Whatever the situation, we are completely open to discussing what might be your idea of a perfect payments integration. We understand that software companies are under pressure from competitors, demanding clients with special needs, and from their own company to provide the next best widget. We have even gone to the length of providing a few vertical partners with exclusivity because once the integration was complete and feedback started coming in, they knew it would only be a matter of time before their competitors found us.
Can electronic payments better position your company? Can they provide an additional revenue stream? Those questions can only be answered by exploring your options. Why miss the boat?
Recurring ACH Payments offer business owners a secure, reliable and cost effective method to automate payment collection via the ACH network. ACH payments offer distinct benefits versus credit cards.
On a $100 recurring payment credit cards may cost $2.50 on average. As a recurring ACH payment that transaction you might pay a flat 30 cents-an 88% reduction. Multiply that by how many customer payments and it does not take long to become significant. Cost reductions are an overlooked tool for improving overall business profitability.
2-Payment decline rates: On average recurring billing credit card declines exceed 10% with some industries seeing 20% declines.
Imagine you are a business owner with 500 customers that you bill $100 per month on a recurring basis. Your business runs and plans based on $50,000 per month coming in the door on a regular basis. It took a long time and a lot of work to get to the point where your business generates that amount of reliable predictable income. You pay salaries, rent, plan development, and manage marketing campaigns ALL around that recurring ACH Payment revenue.
Now imagine that 15% of that revenue, or $7,500 per month, goes uncollected — and not because your clients don’t want to pay you.
That is the BIG issue with credit cards. Yes there is a major advantage-you know almost instantly the payment is successful and you will be funded the expected monies but especially with recurring ACH payments the risk of payment issues is very low.
Contrast this with ACH decline rates. You will likely see sub 2% declines. You can see why when you consider how often you change your banking.
Businesses that rely on recurring customer payments know that reliable, predictable cash flow enable a business to better plan for growth, meet financial obligations and if managed properly can create a more valuable business valuation.
There are significant challenges to optimizing recurring payment collection. Most businesses spend a significant amount of time and money acquiring new customers. You are counting on these new customers adding to your recurring revenue stream.
By adding an ACH recurring payment solution OR by actively recruiting your customer base to adopt ACH payments you win on both reducing payment fees and payment declines.
What are your Recurring ACH Payment Collection Options?
An ACH Virtual Terminal is a web-based hub that allows businesses to securely accept single and/or recurring payments via ACH [echeck] or credit/debit card. A Virtual Terminal allows the management of Credit Card and recurring ACH transactions, and provides businesses with a secure web browser software application for payment acceptance.
Transactions can be one-times or scheduled, and scheduled transactions can be single future or recurring ACH transactions. The Virtual Terminal can be utilized for transactions by organizations who have preexisting credit card merchant accounts.
2-Payment Enabled Software
You may use a software application that helps you run your business. Your platform provide may have implemented payment collection via an ACH Integration. The integration allows payment origination and reconciliation from with the management software. In looking at using an Integrated ACH solution you want to be aware of how payment rejects or declines are handled.
There are two ways and yours will depend on how tightly the ACH integration was performed.
Let’s look at billing 1000 customers all via ACH on the 1st of each month.
Your platform has two options. In the first as soon as those 1000 transaction are sent to be processed they are also marked as paid. Now it is unlikely all 1000 transaction processed without issue eg NSF (non-sufficient fund). Maybe 15 did not actually fund. Your business will be provided with return information, often via ACH Virtual Terminal and you then go back into your software and back out that payment recording.
Note-Some ACH Processing Providers offer automated NSF resubmission tools that make re-attempting payment collection simple.
The ACH network is a batch environment. This means at the time of payment you have no way to be certain the payment will be successful–the vast majority of times it will.
However this can often lead to accounting reconciliation issues where the platform payment reporting and the customer’s bank statements don’t match.
Having sophisticated ACH Payment Deposit Reconciliation tools allows you to reconcile payments deposits directly in your payment reporting suite. The vast majority of ACH API providers DO NOT offer this level of reporting insight.
The second integration option would involve your software platform reconciling returns for you so that your accounting is always up to date.
Certainly the second option is nicer for you. It is important that you know how ACH returns are handled.
3-Subscription Billing Software
Subscription billing management is big business as companies demand the ability to provide multiple payment options to retain clients and maximize profitability. Prorating, metered billing, trial periods, anniversary billing and other options all contribute to the demand for subscription billing.
If your business relies on acquisition tools like free trials as well as upsell and downsell options the subscription billing solution may be the best fit.
A brief history of ACH Processing
The ACH [Automated Clearing House] Network allows for electronic debiting [and crediting] of checking and savings accounts. The network currently operates in the US and Puerto Rico.
Originally created to reduce paper check processing the ACH network began in the 1970’s and was predominately used to collect insurance premiums and mortgage payments in an automated fashion. Payroll direct deposit was and is another strong driver of ACH transaction volume. Today the ACH network processes billions of transactions each year and streamline payment processing for 1000’s of businesses.
The ACH network consists of more than 12,000 financial institutions, 650 industry councils, and a network of regional ACH associations, and is governed by NACHA – The Electronic Payments Association in Herndon, Virginia. The National Automated Clearing House Association was established in 1974 to coordinate efforts to develop a nationwide ACH network, ultimately succeeding in 1978, when all ACH networks nationwide were electronically linked.
In 1980, the ACH Network was changed slightly by the passage of the Monetary Control Act, which allowed for private sector ACH Operators to compete with the Federal Reserve Bank.
Role of the Third Party Processor:
Most banks do not have the tools resources to allow businesses to manage ACH transactions. That is where the Third Party Processor steps in.
The TPP you work with has a relationship with a bank to use their “Fedline”. This is the pipeline that carries transaction data to the Federal Reserve. The processor typically has a good amount of money on deposit with the bank to cover the bank’s risk of fraud and non-payments. The advantage of working with a third party processor is that their front end tools e.g. software, Internet product or integration tools are much more user friendly than a bank.
Pricing Information
What should you know? Pricing is typically a function of volume but you shouldn’t have to pay much more than .35 per transaction and in cases of high volume this can drop considerably. You should not be paying a discount rate in most cases except in higher risk categories. Returns (NSF etc.) should not be costing more than $3.00. Higher risk may change this. Monthly fees no more than $20-25.
ACH Payment Processing: What Your Business Needs To Know
An ACH Processing Company offers businesses the ability to electronically debit [and credit] checking and savings accounts. ACH Payments are an especially attractive option for recurring payments billers.
In the US we have two main payment rails. One is credit/debit card processing and the second is the ACH Payment Processing network.
There is a major difference in how they work. Credit/debit card processing offers an authorization component. This means you can ascertain in near real-time that your customer has the requisite funds to be debited and place a hold on these funds. Essentially you know at the time of sale whether or not this customer pays you.
The ACH world operates in a batch environment where all transactions received on Monday get sent to the Federal Reserve for processing early Tuesday morning. The two banks involved have 48 hours to reconcile and settle the monies. There is a risk of the customer not having enough money or having a closed account or several other return reasons. This can be a drawback for businesses that accept one-time payments for goods or services. You would not want to ship a $1000 order until you knew funds were good.
ACH Risk Mitigation
There are risk mitigation tools to reduce your risk of accepting a “bad” check. The first checks that the bank account is open and in good standing via ACH Check Verification. This service tells you there is money in the bank account but does not tell you the blanace or if your $59 debit is covered.
The 2nd tool can provide a $ balance check as well as ascertain check writer’s history. The caveat is that the customer will need to log-in to their online bank platform. This could happen on your website via a pop up “lightbox”. Once the person log in you are able to tag along and check data points. This also provides Checking Account Owner Authentication, meaning you know if Suzy Jones owns the bank account she is providing.
So why should you use ACH Processing over Credit Cards?
Two BIG reasons.
First is the cost to process the payment. For recurring payments, you could expect to pay an average of 2.5% or more as total cost. So for every $100 customer debit you have $2.50 in fees. Cutting your margin by 2.5% can be difficult for businesses especially those in competitive commoditized industries.
In contrast, that same $100 transaction might cost a flat 30 cents as an ACH Payment.
So you save $2.20 per customer debit. Having 500 customers all on credit cards costs you over $10k per year more than an ACH option.
Second is payment rejects or declines. Let’s say we have 500 clients billed via credit cards on a monthly basis. Credit card declines routinely exceed 10% with 15% common.
Consider the business above billing 500 clients. 75 or so decline resulting in a revenue shortage of $7500/month or $90k per year. Sure effort [read $ costs] will be made to rebill but you can count on 2 things: 1-You are going to lose revenue and 2-You are going to lose customers you just could not collect from.
Contrast this with the ACH world. How many times in the past five years have you changed bank account? And how many new credit cards? You can see why decline rates are much lower, typically averaging around 2%. 15% versus 2%—BIG reason why an ACH Payment option is MUST HAVE for recurring billers.
We offer multiple solutions to leverage ACH Payments:
1-ACH Virtual Terminal: Secure web based platform to set up recurring and one-time debits or credits. Complete reporting tool set and automated , customized email customer receipts
2-ACH Integration: Integrate an automated collections and reconciliation solution into your SaaS and create a stronger product your end users can’t do without.
3-ACH Website Payments: Simple, secure 24/7 payment collection options. Customize around you and your client needs.
We work with SaaS platforms looking to embed ACH processing solutions into their application. Using a feature-rich ACH API you can offer elegant payment and reconciliation solutions.
What Should a Business Look For in an ACH Integration API?
Can you leverage the ACH Processing Integration for your apps’ revenue stream? If you offer your clients payment solutions your ACH partner should provide a revenue share
Is there an API that would allow your customers to apply from your site or app?
Other payment utilities available eg IVR and SMS payments?
Does the platform meet PCI Security standards (though NACHA does not require ACH transactions to be PCI compliant)?
Does the partner provide assistance in ACH payments processing adoption for you and your user clients?
Does the ACH API offer additional utilities to make calls for anti-fraud and risk mitigation?
For market bases that include Canada: does the partner provide a single API for both United States ACH and Canadian EFT?
Is sensitive data tokenized?
API availability: Does the partner offer RESTful or SOAP ACH transaction integration, or both?
How long has your potential integration partner been serving the needs of app providers and what is their track record?
Are there white label possibilities that might allow for a branded processing option, keeping the ACH processor behind the scene?
Can risk acceptance models lower processing costs?
Will your potential partner take the time to understand your business requirements and provide options that custom fit the payments needs to your needs and your clients?
Here is how a typical ACH transaction is processed from the perspective of you paying your Gym monthly membership via ACH:
On the first of each month, your fitness club tells his biller (the Originator-many times a Third Party Processor or an integrated software partner) to send a request to your bank to transfer $50 from your bank account to the fitness clubs account, per your written or online payment agreement.
The Originator sends this information to your bank, which deducts the $50 from your account and sends the information on to the ACH Operator (Third Party Processor-TPP). The $50 is still in your account, but no longer available to you, and is typically flagged as a “pending ACH debit”. Essentially, it’s a hold on that $50.
The ACH Operator notes that your bank is sending $50 and that the TPP on behalf of the fitness club is receiving $50, and makes the proper transaction notations (much like ledger entries).
At this point, no money has actually changed accounts-the ledgers show the $50 transaction but it’s all digital.
Until accounts are settled and the payment is “cleared” the transactions is not official.
What should you know about ACH Processing?
Pricing is typically a function of volume but you shouldn’t have to pay much more than .35 per transaction and in cases of high volume this can drop considerably. You should not be paying a discount rate in most cases except in higher risk categories. Returns (NSF etc.) should not be costing more than $5.00. Higher risk may change this. Monthly fees no more than $20-25.
Make sure your processor has been in business a few years and has some main-stream clients. A third party processor processing high risk transactions (telemarketing etc) can and has been be taken out of business by an unscrupulous company. Ask about some of their clients and front end tools. The better processors are always looking to make product improvements. Account verification is a major improvement. You can now ascertain if the check writer has a valid account with money in it before you take payment. Coupled with a processor with a strong collection program and you can dramatically reduce your risk of accepting bad checks.
Role of the Third Party Processor:
Most banks do not have the tools or resources to allow businesses to manage ACH transactions. That is where the Third Party Processor steps in.
The TPP you work with has a relationship with a bank to use their “Fedline”. This is the pipeline that carries transaction data to the Federal Reserve. The processor typically has a good amount of money on deposit with the bank to cover the bank’s risk. The advantage of working with a third party processor is that their front end tools e.g. software, Internet product or integration tools are much more user friendly than a bank.
ACH Processing Overview
Originally created to reduce paper check processing the ACH network began in the 1970’s and was predominately used to collect insurance premiums and mortgage payments in an automated fashion. Payroll direct deposit was and is another strong driver of ACH transaction volume. Today the ACH network processes billions of transactions each year and streamlines payment processing for 1000’s of businesses.
The ACH network consists of more than 12,000 financial institutions, 650 industry councils, and a network of regional ACH associations, and is governed by NACHA – The Electronic Payments Association in Herndon, Virginia. The National Automated Clearing House Association was established in 1974 to coordinate efforts to develop a nationwide ACH network, ultimately succeeding in 1978, when all ACH networks nationwide were electronically linked.
In 1980, the ACH Network was changed slightly by the passage of the Monetary Control Act, which allowed for private sector ACH Operators to compete with the Federal Reserve Bank.
Does your company need to accept both Credit Cards and ACH Payments?
We have you covered!
Many merchant organizations have the need to accept both ACH and credit card transactions. Ideally, this is accomplished from a single source, providing both merchant accounts. Moreover, the processing provider should be able to accommodate the necessary tools to meet the merchant organization’s requirements, whether they be API integration, web based virtual terminal, website payment utilities, IVR payments or a bill lookup and payment solution.
Here at ACH Payments, we can supply all the tools required to meet any needs for integrating or managing both credit card and ACH payments.
There’s no question that credit cards are the most used payment vehicle in payment collection. However, many businesses can realize significant benefits by accepting ACH payments from their customer base. Businesses that are especially well-suited share some common traits:
They know their customers well. This is important form the perspective that the ACH network is a batch environment
Many have a recurring payments (subscription-based model) component.
Their risk of product loss via shipment before settlement is far less than an organization that sells products that are not of a subscription model.
Here are a few business types that are great fits to offer bot ACH and credit card payments customer options:
For businesses that have recurring payment collection needs the benefits of offering ACH Payments in addition to credit cards are clear:
Processing costs. ACH payments cost a merchant organization far less than credit card processing. Pricing for ACH transactions starts under 30 cents. For comparison’s sake, let’s take a merchant that has 2,000 transactions per month with an average sale amount of $100.00. Credit card processing costs would amount to greater than $5,500. Those same sales processed as ACH transactions would amount to less than $600 in processing costs.
Credit card declines: Credit cards have expiration dates. Bank accounts don’t. Further, credit cards are compromised far more often than bank checking or savings accounts. For a merchant organization of a subscription-based model, credit card declines create a great burden to tracking down new credit card data. Each year about 30% of ALL credit cards get reissued. Consider the last time you changed your bank account versus how many times your credit card has changed in the past 5 years. This creates significant workflow demands on any organization accepting recurring payments
While ACH Payments started off 19 years ago providing needs only for ACH processing, it was only a few short years later that we began meeting the needs for integrated processing of both credit cards and ACH payments. These two payment vehicles are both required for many merchant organizations.
ACH Payments provides the following for accepting both credit card and ACH transactions:
API integration. Both RestFUL and SOAP API integrations are available.
Superior ACH Payment Reconciliation (and credit card) tools. These allow your platform the ability to reconcile bank deposits to platform reporting.
Website payment utilities. Both hosted and javascript modal utilities are available for accepting payments from websites.
Canadian processing. ACH Payments can facilitate credit card merchant accounts for both the USA and Canada. We can also provide Canadian EFT processing as well as USA ACH processing.
Credit card decline management. ACH Payments can provide credit card updater services as well as additional decline management tools.
PCI Level one platform. While ACH/EFT transactions are not subject to PCI requirements, they should be. Both credit card and ACH/EFT transactions run on a PCI level one platform.
Tokenization. All API integrations and utilities can return reference tokens to be stored on your platform, greatly reducing PCI scope and risk of sensitive data theft.
Revenue sharing. Software applications of a vertical nature can share in revenues by leveraging their vertical base.
Risk mitigation utilities. Bank account verification and authentication is available, including account ownership and funds availability.
ACH adoption assistance. In some cases offering recurring ACH payment options as an additional payment vehicle doesn’t mean it will be adopted in great numbers. We have 19 years of experience in increasing adoption rates to ACH. We’re here to help your organization in a number of ways to increase ACH the adoption rate.
White label. Does your company want the processing to remain behind the scene? We have white label opportunities that can allow your company to be in the forefront of the processing of payments.
Application and underwriting process. Need your prospective software application user to apply from your website or mobile application? We can provide an API for doing just that.
Understanding requirements. Here at ACH Payments, we will take the time to listen to your requirements and help you formulate the right solutions in order to meet your needs.
Experience. We have 19 years of experience in assisting organization of all sizes for credit card and ACH processing needs.
Ease of data transfer. Should you ever want to leave our family of merchants, we don’t hold your data hostage for migration.
Some details about data migration: A company that wishes to migrate from one processor to another must do so in a secure fashion. Details vary from processor to processor. In some cases a merchant must have a minimum number of customers in order for the merchant account provider to even consider a transfer for migration. In other words they are stuck until they meet than minimum number. In other cases the existing merchant account provider will demand an exorbitant fee in order to migrate the data. We have seen such fees in the thousands of dollars – in once instance an existing provider demanded in excess of $10,000. Ridiculous! Don’t let you data be held hostage. We don’t. While yes, there is some work involved, our data migration fee rarely exceeds $100.
ACH Payments provides secure and reliable credit card processing with ultra-fast response times. Most importantly, we’ll breakdown all the credit card industry jargon and explain to you in the simplest way possible, how credit card pricing works and why opting for our interchange-plus pricing model will best work for you.
With a credit card merchant account from ACH Payments you will be able to:
Perform single and recurring transactions.
Accept point of sale and card not present (MOTO) transactions.
Integrate e-checks into a singular platform for ease of management and report reconciliation.
Add AMEX and Discover with ease.
In combination with our integration methods you can enable ERP, CRM, CMS and almost any application you can think of. Contact us now to learn more.
ACH Check Verification allows merchants to mitigate check acceptance risk at the point of sale, online or in person. Checking account verification options range from automated routing number check to negative database options to near real-time inquiries into current checking account status, and checking account balance inquiries (which require the customer to either log-in or provide credentials to their online banking system).
Note: Beginning in March 2021 businesses that accept web-based ACH transactions must validate that the bank account is open and in good standing. see NACHA Check Verification Rule Change
ACH Check Validation
Businesses can significantly reduce payment acceptance risk with check verification tools by performing real-time validation of a customer’s bank account, ensuring th
at the account is active with a positive funds status.
Unlike credit cards, the ACH realm lacks an authorization component. Credit cards allow for authorization at the time of payment, ensuring that a customer has the requisite funds on their cards, and reserving those funds for capture and settlement.
For some businesses this lack of an authorization means that ACH Check Verification is necessary to mitigate payment acceptance risk, and prevent your newly onboarded customer from needing to perform a significant amount of work to obtain correct or valid checking account information.
Checking Account Verification Services
Payment rejects are typically discovered only after payment is accepted, sometimes days later. A system to check that a bank account is valid can be invaluable for businesses that operate with a recurring payment model. When payment rejection occurs the business has multiple issues to address:
The commission payment may need to be pulled back
That customer must be contacted for payment
Accounting may need to be undone.
For businesses that accept checks either as an ACH, Check 21 or Remote Deposit all face the risk that the payment will result in a return [failed transaction].
Mitigating loss through third party check verification services can be an important part of the business that relies on ACH processing for check acceptance. So how does a business reduce check acceptance risk?
ACH Check Verification Services
Bank routing numbers identify the bank that a check is drawn against, and the databases holding this information can be checked in real time. Negative databases (comprised of the positive/negative history of that checking accounts info) exist a means of protection for businesses. For example, Walmart can report on whether a check is good or bad to the database. A plethora of retailers contribute data to the network, meaning there are millions of checking accounts to reference. Recency is an issue because a customer’s last instance of writing a check at a participating retailer becomes the last data point.
An ATM network is another function of check verification. A daily upload of account status is made to the network by banks and credit unions, and queries to the network can provide account insight. When a check verification inquiry comes in an almost immediate response can be tell you:
The account is closed
The account is in an NSF status: For some businesses this is important as they do they know they have a good account
Account has pending NSF’s or stop payments
The account is open and in good standing with a positive funds balance. Very importantly you do not get a balance confirmation. The account can have $25 or $25000.
Depending on the provider, the information can indicate:
Invalid checking account
Bad check writer
Closed checking account
NSF checks
Potential fraudulent transactions
Other suspicious activity
To leverage these systems, the customer is presented a lightbox in which to log-in to their online banking or provide their credentials for logging in. Despite the friction caused to the user, this process can provide valuable additional insight.
An ideal 3rd party provider will provide a combination of all the services discussed including:
Real-time Status on Accounts. (via financial institutions)
Proprietary Negative Database
The ability to verify business bank account
Routing number validation
Negative Data (Basic and Premium) Services that provide negative information on unpaid items
The checking account verification services at this level do NOT provide funds availability or balance inquiry, or bank account ownership. For many businesses this provides a significant improvement in their payment acceptance processes.
New client intake or onboarding can be a major friction point for businesses that rely on future recurring payments. By employing ACH Check Verification businesses can eliminate much of the “after the sale” work needed when payment fail.
Payment rejects are usually accidents. Making a customer go through the hassle of the sale process again will ensure that a subset of those sales will be lost. By leveraging checking account verification tools businesses don’t lose hard won customers because of data entry errors.
By the same token, businesses that rely on future billing are especially vulnerable to bad check data. However, using a cutting edge ACH Check Verification businesses can dramatically reduce bad check acceptance and the subsequent problems.
The check verification service should be available as a stand alone [eg using a web based Virtual Terminal] or in integrated fashion that can be programmatically part of workflow. Approve/Decline logic can be customized to the particular business. In some use cases for instance an account currently in an NSF stats may still be onboarded.
When it comes to managing Canadian ACH, Canada EFT (or Canadian Electronic Funds Transfer) is a convenient and cost-effective solution. By utilizing Canadian EFT, Canadian based businesses can debit checking accounts for one-time or recurring payments. Unlike with credit cards, cross border payments are not available. This means that funds are collected and settled in the same denomination. A U.S. based company looking to debit Canadian customers would need a Canadian bank account to settle funds into.
EFT Processing options are limited in Canada compared to the many ACH processing providers available in the States. This means that options are much more limited, as a handful of banks control the payments realm. It is often difficult to gain access to Canada EFT processing capabilities.
SaaS platforms can automate the payment collection and reconciliation process by integrating a Canada EFT application independently or in conjunction with a U.S. ACH processing solution. A single system capable of managing both U.S. and Canadian e-check transactions, and reporting data for reconciliation is a very powerful customer acquisition tool and a great payment revenue generator.
Canada EFT Key Benefits and Features:
Reduce employee and bank service charges. Making bank trips and paying per check fees are both bottom line drags on your business.
Reduce operating expenses associated with collecting/ writing cheques, manual processing, and time spent reconciling accounts.
Receive notification of rejected payments. Many times, and especially if working with a bank’s Canadian EFT tools, you are forced to manually deal with payment rejects. Often these can take a week or more to receive notification on.
Mitigate the risks associated with cheque fraud and forgery.
Preserve the autonomy of your business units while ensuring centralized concentration and control of funds. Automation and systems are the key to scalable growth.
Accelerate the payables process and control the timing of credits/debits to your account.
Reduce lost and stolen cheques. By moving money electronically you reduce risk of paper cheques being lost or stolen.
Efficiently manage cash flow and improve cash forecasting. Reliable, predictable cash flow makes planning much simpler and less stressful.
Comprehensive reporting tools. One differentiator is the Transaction Funding Report that matches up the transactions that are associated with a funding deposit to you, the merchant’s bank account.
For SaaS platforms, Canadian EFT will generate new revenue streams, and offer a pathway to create a more useful and sticky end-user solution.
Canada EFT On-Boarding Process
The on-boarding process is a very important process for any organization, and many organizations prefer for the on-boarding process to be a “white label” process where the third party ACH processor remains in the background. In this scenario the EFT integration must provide a way for the organization to send the required merchant’s data to the ACH processor’s underwriting department (ideally in electronic format, including signatures).
The API must:
Allow for the application and underwriting process to be presented on their website, as though the ACH payments solution is coming from them.
Pass the underwriting data to the processor
Notify the parties involved where the application stands
Pass API credentials to the applicant user once the merchant application has been approved and enrolled.
The Canadian EFT path that the SaaS organization chooses determines how credentials are passed.In some cases the credentials are passed to the merchant themselves. SaaS applications require the merchant user to enter API credentials themselves, and in other cases the API credentials are passed to the SaaS organization for entry oh behalf of the merchant.
Are there risk acceptance models available that could lower processing costs?
Does the partner provide assistance in ACH payments processing adoption for you and your user clients?
Are there white label possibilities that might allow for a branded processing option, keeping the ACH processor behind the scene?
Does the platform meet PCI Security standards even though NACHA does not require ACH transactions to be PCI compliant?
If your market base includes Canada, does the partner provide a single API for both US ACH and Canadian EFT?
Is sensitive data tokenized and can a call be made to immediately tokenize the bank account data prior to an origination?
Will your potential partner take the time to understand your business requirements and provide options that custom fit the payments needs to your needs and your clients?
Are there opportunities to leverage the Canadian EFT Processing Integration for your apps’s revenue stream?
Are there ancillary utilities available from the ACH API to make calls for anti-fraud and risk mitigation?
How long has your potential integration partner been serving the needs of app providers and what is their track record?
API availability: Does the partner offer RESTful, SOAP Canadian ACH transaction integration or both?
Is there an API that would allow your customers to apply from your site or app?
A “Payment Facilitator” (PayFac) can be thought of as being a Master Merchant that facilitates credit and debit card transactions for sub-merchants within their payment sphere.
The advantages to the Canadian Payment Facilitator model
Payment aggregation as business model
Customers love that it is so easy to get the account going with no paperwork or documentation burdens. This dramatically improves the client boarding process.
Buy a Square reader at Walgreens, go online and create your account and within 30 minutes you can be swiping payments. That’s a very attractive acquisition tool.
Flat fee structure: Easy to understand flat fees for your merchant customers. No needs to understand interchange tables.
Speed of boarding process: Being a Canadian Payment Facilitator allows you the ability to setup sub-merchants very quickly, removing a choke point to new client acquisition.
Merchant Control: Sub-merchants are under contract with you, the Master Merchant.
Earnings: Master merchants are able to earn money from network and transactional fees, and potentially float. This is the big one for most SaaS platforms contemplating going the aggregation route.
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the same denomination. A U.S. based company looking to debit Canadian customers would need a Canadian bank account to settle funds into.
