What is ACH processing? The acronym stands for Automated Clearing House processing. Simply speaking, it’s a payment system that happens online as opposed to on paper. It takes place on a nationwide network lain between financial institutions. These institutions, instead of sending checks on paper to each other, send electronic messages to move money around between the paying and receiving parties.
The most typical kinds of ACH transactions include direct deposit, pre-authorized debits, cash concentration (the movement of widely dispersed funds into one central account to streamline cash flow) and payments made corporate-to-corporate.
According to NACHA (The Electronic Payments Association, the nonprofit that oversees the ACH Network), the ACH network is experiencing unprecedented growth. In fact, the Automated Clearing House Network grew by a full fifteen percent in the 4th Quarter 2005 from the year before, with almost three billion transactions conducted during that quarter. Those transactions were collectively worth more than six trillion US dollars.
These figures clearly show that the ease and speed of transactions, as well as the accessibility of the system to individual businesses, is positioning ACH processing as the preferred way for Americans to transfer money between entities.
Why is ACH processing so popular? After all, NACHA statistics point to the fact that nearly half of American households use the system for at least one scheduled, recurring bill payment. Of those, 84 percent tell surveyors that they’re very satisfied with the way the system has simplified their lives.
Better yet, using the system is cheaper than using the mail. In general, transactions hover at around $0.19 apiece for both one-off and recurring transactions, making the process less expensive than buying a stamp to mail a check. Add this to the fact that there’s no envelope to buy, no checkbook to buy, and no time wasted in going to the postbox, and you have a clear winner.
Environmental Impact of ACH
Finally, there’s the environmental issue. We’ve heard it again and again, but operating electronically has an immediate, perceptible impact on the health of the world around us. There is a clearly positive impact to the environment when one chooses electronic payments, bills, and statements over their paper counterparts.
As well as the resources involved in simply creating paper from trees and printing that paper with sometimes-toxic inks, ACH processing eliminates the need for gasoline to move the paper around, the need for the water used in manufacture, and the outlay of industrial waste produced by the process. What a win-win!