Small businesses and large retailers alike rely on ACH payment processing for smooth transactions. Many people like to get an ACH payment because it’s automated and easy to receive. Computer networks batch and process the transactions three times per business day, and businesses rely on the known delivery timelines of these payments. Before you accept an ACH wire transfer, you’ll want to know the difference between ACH and wire transfer and other types of payments your customers or B2B partners use for payment.
About ACH Payments
ACH stands for the automated clearing house. Computers handle the automation of the process. One company, Nacha, controls this network. Some other names for ACH include electronic deposit, direct deposit, and direct payments.
Features of ACH Transactions
To consider ACH vs wire transfer, a business owner must know about the features of ACH. According to Nacha, the organization that sets the standards for ACH payments, this payment method consists of the payer’s financial institution submitting an electronic transfer of funds to the payee’s institution.
Nacha processes, aggregates, and distributes all ACH payments. Computer networks handle these activities, and the process occurs three times each business day. On federal holidays, no payment processing takes place. However, payment distribution takes place in favor of the customer or payee.
How ACH Payments Work
ACH payment processing begins with the direct transfer of the money:
- The customer authorizes the payment to the payee.
- The computer network simply processes the transaction. It does this by verifying the availability of funds in the payer’s account.
- The payee’s financial institution requests the payment, and the customer’s bank verifies the request and transfers the payment.
About a Wire Transfer
When it comes to ACH vs wire transfer, wire transfers involve the electronic movement of funds. Therefore, they require the use of a middleman. In most cases, the intermediate party consists of a for-profit business or entity. A customer must provide their name, bank account number, and routing number to conduct a wire transfer. They must also provide the payee’s name and account numbers.
How Wire Transfers Work
To send money via a wire transfer, a customer pays the transfer fee plus the transfer fee at a remitting bank or service provider. The service provider initiates, verifies, and completes the transaction. Wire transfers of money only require a few seconds.
The payer must provide the cash for the wire transfer to take place. First, the bank turns the cash into electronic funds. Then, the funds appear in the recipient’s account.
Features of a Wire Transfer
Wire transfers typically involve a fee. Most of these fees consist of a percentage of the amount of the transfer. A domestic transfer occurs within a few hours. However, international transfers may take up to two business days to complete.
Is ACH Same as Wire Transfer?
You may ask, “Is ACH same as wire transfer?” No, ACH is not the same as a wire transfer, but the two do share several standard features.
Both involve the electronic transfer of funds from one banking institution to another. They also both involve secured data transmission networks. Both ACH wire transfer methods of payment allow a person to pay a bill or settle an account. Both ACH wire transfer transactions offer security. Theft rarely occurs with ACH or wire transfers.
ACH vs Wire Transfer
When you consider which payment methods to accept, you need to know the difference between ACH and wire. These differences could make a difference in your bottom line. In addition, you’ll need to consider the geographic location of your customers, the types of customers you serve, and the number of transactions you handle per day, week, or quarter.
Is ACH same as wire transfer? A significant difference between ACH and wire involves the cost of conducting the transaction.
In most cases, banks and credit unions charge the customer a minimum of $25 to conduct a wire transfer. If you have no qualms about paying this fee, wire transfers may be fine for you. With ACH, your business pays the fee. However, ACH fees average $0.25 per transaction.
Another difference in wire transfers versus ACH payment processing relates to the timeline of the transfer. For example, if a customer initiates an ACH payment on a Friday afternoon, your business may not receive the funds for two or three business days. Wire transfers require one business day for completion.
Wire transfers require the actions of a person on both ends. Both the originating and receiving institutions must have a human check and verify the account names, details, and payment amounts. With ACH payments, computers handle the transaction processing, and no human intervention or verification takes place.
Many con artists make use of wire transfers to collect payments from their victims. A common scam involves a scammer sending a person a check and then asking them to transfer part of the money back to them. Once a person sends money via a wire transfer, they can’t get it back. Authorities recommend only transferring money via wire to a known individual. ACH payments can be reversed.
During the downtime of a wire transfer, fraud may occur. Many remitting institutions require the sender and recipient to prove their identity. With ACH payments, the computer network verifies the legitimacy of the accounts. Possible fraud flags require investigation at the payee’s financial institution. The system may reject the payment automatically in fraud situations.
Remitting financial institutions send wire transfers individually. Nacha batches ACH payments. It may send thousands or even millions of them at once.
ACH Versus Credit and Debit Card Payments
Most small businesses accept credit and debit cards. Customers tend to find these payment methods convenient. However, the theft of a credit or debit card could wreak havoc for a customer.
With credit and debit card payments, the business accepting the payment pays a fee, and the bank sending you the payment deducts it from your payment amount. The fees range from 2% to 5% of the transaction. In addition, credit card payments often involve three or more parties, which adds to the complexity and time requirements for completing the transaction.
Credit card processing starts at a point-of-sale terminal or online payment platform. The platform or terminal authorizes the amount. When a customer uses a physical credit card, chips and other security features reduce the risk of fraud. However, using a stolen card offers an easy way for a thief to get around these measures. In addition, ACH requires the knowledge of account numbers, so fewer instances of fraud occur with ACH.
Now we’d like to hear from you. What was the most helpful information in this article? Did you gain some understanding between what ACH is compared to what a wire transfer is? Will this information make any impact on the types of payments your business accepts? To learn more about how ACH payments compare to other kinds of payment methods in B2B and customer transactions, contact us at Checkissuing.com today!