The ironic thing about the ACH—or automated clearing house—system of payment is that it’s often regarded as an “old fashioned” system of handling transactions. It’s fine for big businesses that want to move cash around efficiently and have a bit more time on their hands, but a lot of people view the credit card as the standard way for people to buy things today.
However, in recent years, ACH has become more attractive to businesses, and not just when it comes to dealing with other businesses, but when it comes to dealing with younger retail demographics. The “millennial generation” as they are known, those born between the decades of the 1990s and early 2000s, have displayed some surprising financial traits. 63% of millennials don’t have credit cards, and simply make do with cash and credit cards.
One of the reasons for this shift in spending habits is the period in which millennials were born. Many people in this age group grew up in a time when financial crises were rampant, homes were repossessed, and their parents made a painful case for the dangers of overspending with credit cards as they were plunged into debt. It made a sobering impact on the millennial generation that largely prefers to minimize debt, especially in the face of some unavoidable, significant debts, such as student loans.
With more millennials preferring to use a debit card as a form of payment, it means that ACH payment processing becomes a viable and useful solution for vendors. The ability forgo the transaction fees of credit cards, and have your payments processed at a later time—with cheaper fees—is an efficient, affordable solution. Credit cards, obviously, are not going to go away, and will continue to be an important form of payment processing, especially for transactions that occur online.
But as ACH processes become more efficient and more convenient, this system can now go far beyond just business-to-business transactions. Physical cash transactions continue to shrink in number, especially for more expensive purchases, but with a generation that is now debt-averse, credit cards, with their interest rates and monthly payments have lost some of their appeal to a certain demographic of shoppers. With more debit card purchases occurring, it may be time for you to consider whether the ACH system is one that can make your own finances more efficient. If you find that your debit transactions are on the rise, maybe ACH is for you.