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How to Use ACH Transfer: The Why and How of Integrating Bank Account Payments into Apps

By Nick Epson on March 9, 2021

The more payment options you’re able to offer through your app, the easier it is for customers to conveniently make payments, thus it’s important to understand how to use ACH transfer mechanisms in apps. ACH, which stands for Automated Clearing House, refers to the underlying network of systems that handle the electronic moving of funds between banking institutions. Like when taking a child with a good palette out for ice cream, your best bet is likely a place that offers copious flavors over establishments that only offer a few.

Of the many payment methods available, ACH is among the best for a few different reasons. In this piece, we’re going to explain why this is true and cover a few options that you can use to offer this option in your app.

Why is offering ACH important?

Until modern payment processors evolved and were adopted by institutions such that individuals could easily make payments with a card, everyone mailed in checks to pay their bills. This fell out of favor for obvious reasons because it’s inconvenient and incredibly insecure, especially today. Should someone intercept a piece of physical mail that includes a check, they have an account holder’s name and address, as well as account and routing numbers.

Today, using electronic checks, most cards, and other payment processors makes paying businesses and friends both easier and safer than ever before.

Passing any kind of payment information in plain text or writing means an onlooker can easily copy said information to do as they please. However, when this information is sent via digital means using secure systems (which we’ll cover next), there’s little cause for concern.

Before we get into the “how to use ACH transfer” process for apps and websites, understanding the “why” portion is essential.  Offering ACH is advantageous as it allows users to securely make payments directly from a bank account, much like using a debit card. On the customer end, it has the same “feel” as using a debit card as funds leave their account the same way. It’s ideal for recurring payments as it provides a system that needs little to no intervention as information like routing and account numbers are static, unlike debit or credit cards that expire every couple of years at which point, any connected account needs to be updated.

From the business end, the specific benefits are: 

  • Less hassle from a disruption of service stemming from trying to bill expired payment methods.
  • It’s less expensive as the fees for each transaction cost are substantially lower than those associated with cards.
  • It allows you to accept checks over the web which is far more convenient and secure than processing paper checks.
  • Like a card, any human error is immediately detected so it can be quickly corrected.
  • Reversing an ACH payment on the customer end requires that more specific criteria must be met compared to debit or credit card chargeback.

Of course, we don’t want businesses using ACH payments to screw over customers: we want them safe. On the flip side, there are plenty of sketchy people out there who will initiate a chargeback for no valid reason, simply because it’s a means to get their money back. Most banks and credit card companies rollover for honest customers and horrible people alike so it’s good to have a tool to protect against the latter.

How to use ACH payments in your app

Rather than go into the technical details of how an ACH exchange transpires, let’s just say “there’s an app for that.” Today, developers can use plugins that feature powerful APIs which securely transmit payment information to where it needs to go. These established systems are well-documented and easy for developers to embed in software. Most importantly, they offer a turnkey solution that eliminates the harrowing task of having to build a functional payment processing system from the ground up.

A couple of the most popular systems on the market that we recommend are Stripe and Dwolla. There’s some debate as to which is better but the premise is the same – each solution provides a base system that allows businesses to securely accept payments over the web. While features vary (Stripe is the clear winner in this category, by and large) they both offer systems that enable merchants to accept ACH payments as well as disburse payments using connected accounts. This is how we powered the payment portion of the apps we developed for the on-demand marketplaces, Hyer and Hello Sitter. Both Stripe and Dwolla have a streamlined system that can incorporate another useful service known as Plaid to make it simple and safe for customers to connect banking information.

The Plaid platform itself doesn’t handle the actual payment process – it’s a third-party system that integrates with apps like Stripe, Dwolla, and other banking or financial apps to securely authenticate access to a bank over the web. The advantage here is that it eliminates the process of needing to verify microtransactions to verify a bank account. As such, there’s no waiting after an account is successfully connected so customers can begin spending immediately.

From a technology standpoint, these systems are incredibly resilient so long as your company is following security best practices. The only real challenge is getting reluctant customers to use this payment process instead of a card as this is better for your bottom line. With that said, so long as you’re offering options to pay by card (and don’t forget PayPal) then you’ve covered all the bases. As such, the only other tip we have for “how to use ACH transfer” solutions is convincing users to take advantage of this offering – consider including some content in or around checkout to let customers know this option is available and why it might be in their best interest to use.

Blue Label Labs builds software so your business can safely collect payments

We seek out challenges in design and outcomes by embracing innovation and confronting the unconventional. Fortunately, adding a payment system to your app is a breeze, thanks to our years of experience. Though we’re fans of Stripe here, there are several other great options on the market and if you’re having trouble deciding, we’re here to help. Feel free to reach out to us to learn more about how we can build your app with today’s best payment processing solutions. 

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