What’s an ACH Payment?

Real-Life Example

You invoice a customer for $2,000.  The customer visits their online banking portal and initiates a transfer to your account in the amount of $2,000.  Additional Details

• Payment Value – Used primarily for low-value payments that can be transferred over 1-3 days
• Timing – Traditionally 1-2 days, but real-time payment options are emerging
• Primary Use Case – Supplier invoice payments, employee payroll, recurring bill payments
• Credit vs Debit – Classified as credits (customer-initiated) or debits (supplier-initiated) 
• Alternatives – Lower cost than credit card payments, wire transfers, and checks

Advantages of ACH (Especially for SaaS)

ACH is a good alternative to credit cards for a subscription businesses because:

• It’s cheaper than credit card fees — often just a few cents as compared to 2-3% of GMV 
• For autopay, it avoids the complexities of updating expired cards and retrying declined payments. 
• It can handle higher value payments, like $10k+ invoices, no problem. 
• It’s smoother for everyone — especially with auto-renewals or yearly deals.

Disadvantages of ACH

ACH introduces more friction in the autopay enrollment process

• Bank must verify for fraud using micropayments or Plaid
• Finance team must get involved to approve bank transfers
• Many unwilling to approve automatic debits without reviewing invoices first

How it Works

Here’s how it usually is set up:

1. Customer opts in – when they initially buy or during an invoicing cycle.
2. The customer’s bank checks for fraud using a microdeposit or Plaid verification.
3. When an invoice is due your system (or payment tool) pulls the money using the ACH network.
4. The cash shows up in your account in 1 to 3 business days. 

Platforms like Ordway help enroll customers in automated ACH payments for recurring billing.

Comparison to other Payment Types

• Wire Transfers – Are more expensive than ACH, but move money faster.
• Paper Checks – Are more expensive than ACH. Take longer to clear and settle.
• Credit Cards – Are more convenient for customers, but more expensive to process.

Alternatives to ACH Outside the US

• Canada – Pre-Authorized Debits (PADs) are processed through the Electronic Funds Transfer system operated by the ACSS in 1-2 days.
• United Kingdom – Direct credit and direct debit payments are processed by BACS in 3 days.
• France, Germany, and EU – SEPA credit transfers and SEPA direct debits are processed in 1 business day, same day, or real-time.
• Australia – The BECS system processes EFTs overnight and in real time