You are probably already familiar with ACH payments, whether you realize it or not. Is your paycheck directly deposited into your bank account? That's thanks to ACH. Or do you have your mortgage or car loan or any other recurring bill paid from your checking or savings account automatically at the end of the month? That, too, is ACH at work.

It all started back in 1968 when a group of California bankers were concerned about the growing volume of paper checks. They feared it could outpace the technology and equipment used to clear those checks.

So they formed the Special Committee on Paperless Entries or SCOPE. Around the same time, the American Bankers Association sponsored a study looking at ways of improving the nation's payment system. These events led to the 1972 formation of the first ACH association in California to handle electronic payments.

Started in the 1970s, ACH is run by the National Automated Clearing House Association, a private organization known as Nacha. Banks and other financial institutions that transmit the payments made via ACH transfers pay fees that support Nacha's administration of the network.

ACH stands for Automated Clearing House. It is a network used for electronically moving money between bank accounts across the United States. This centralized network allows funds to be transferred from one account to another relatively quickly and inexpensively.

The ABCs of ACH

There are two types of ACH payments. The first is Direct Deposit. Direct Deposit involves payments from a business or government to a consumer. They include payroll payments, employee expense reimbursement, government benefits, tax and other refunds, annuities and interest payments.

The second type of ACH payment is Direct Payments. Direct Payments comprise funds used by individuals or organizations to make payments.

Or, to put it another way, Direct Deposit is about receiving money while Direct Payment is about paying money—all done electronically.

The advantages of ACH are many.

Maybe the most significant advantage of ACH payments is convenience. An ACH payment is easier and less time-consuming than managing checks. There is no need to deal with lost, damaged or unreadable checks or having to deposit a check at the bank or a lockbox.

Another benefit is that ACH payments are more affordable than other payment methods, depending on where you bank and the type of transfer involved. Sending and receiving ACH payments is also usually quick, much quicker than sending a regular check. They take just a couple of days to settle.

And finally, if going green is important to you and your customers, ACH offers a paperless alternative to checks and physical mailings.

The pandemic is accelerating the shift to electronic transfers.

It's been a rough year. In response, consumers are adjusting their buying habits. One of those ways is by turning to the safety and convenience made possible by electronic transfers.

Here are some more numbers from 2020:

  • Direct Deposit of salaries and wages, benefits and assistance payments and other distributions from organization to individuals increased 12% to more than 8 billion payments.
  • Consumers using the Internet to pay bills, transfer funds and make other payments increased 15% to more than 7.7 billion payments.
  • Business-to-business payments of supply chain, vendor payments, bills and other transfers increased by almost 11% to 4.4 billion.

Is ACH right for your business?

If your company is handling physical checks, takes recurring payments, or processing high-ticket dollar transactions, you definitely should consider ACH as a payment option for your customers. If you are looking for an affordable way to send or receive money, you really can't beat ACH transfers. And if you want to save money, ACH transfers are as cost-effective as any payment method available.

But most of all, if you are committed to giving your customers the best service possible, you owe it to them to offer an array of payment options to suit their individual needs. For a lot of consumers today, that's going to include ACH payments.

About Qualpay

Qualpay is a fully-integrated payments platform that utilizes the most up to date technology to reduce costs and streamline back-office operations. Its comprehensive system addresses and resolves the payment challenges businesses face, ensuring a stronger, more robust infrastructure that allows companies to focus on growing their business. Qualpay's reporting intelligence and data analytics allow customers to quickly and efficiently manage their payment finances, saving them both time and money. Simply put, Qualpay provides a better way to manage payments. For more information, please visit