This blog comes as a guest post from John Rampton, CEO of John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of the online payments company Due. Follow John on Twitter at @johnrampton.

Whether you want to transfer money to a friend or you are a small business owner, you’re constantly sending and receiving money. Between checks, credit cards, peer-to-peer apps, and eCash, transferring money has become incredibly convenient, but what about ACH payments?

ACH stands for “Automated Clearing House,”  which are electronic transfers that let people pay directly via their bank accounts. ACH has been around since the 1970s and essentially helps banks keep stock of how much they owe each other. At the end of the day, the transactions that people have made are processed in batches (rather than one-by-one).

Overall I’ve found that businesses have enjoyed the following seven benefits when accepting ACH payments. Here’s my take after working with Dwolla.

Lower transaction fees

With the exception of cash, ACH transactions have some of the lowest transaction fees. For example, here are the approximate fees involved with a $500 transaction:

  • ACH Cost: $0.55
  • Paper Check Cost: $1.22
  • Credit Card: $9.60 (1.9 percent fee x $500 transaction + $0.10 transaction fee)

The reason that ACH transaction fees are more affordable is that since the transaction deals with the banking network there’s a small interchange fee, usually around 0.5-1 percent of the total transaction—just a few cents in the end. When using Dwolla’s API for your ACH transfers, there is no fee per transaction.

Provides better confirmation

ACH transfers require a confirmation process between the RDFI and ODFI. Simply put, the transfer is verified only after making sure that the name and information on the account match the information in the ACH network.

Understand payment failures

Verification process required for ACH payments should help keep the lines of communication open between you and the customer so that you can resolve any payment concerns quickly when you receive a payment failure.

Payments are faster

In the past, it took several business days for a transaction to be delivered. However, there was a new rule from the National Automated Clearing House Association (NACHA), which went into effect September 2016. This rule is the first step in moving toward faster ACH payments, with three ACH network processing times daily, as opposed to the current one per day. This takes place over three phases, concluding in March 2018. This will ultimately make same-day delivery of funds a reality.

It’s designed with recurring billing in mind

If your customer or vendor has authorized the collection of payments each month on its behalf, then you can use software like Due to automatically invoice or withdraw funds from its account. In short, ACH allows the billing process to become automated and easier.

API for ACH Transfers

ACH transfers come with many benefits and the new rules for same-day transfers are improving the system, but the network is outdated. For example, transactions take several days because the system has been keeping banking hours. This means that transfers can’t occur on weekends or holidays.

Thankfully for businesses and platforms, fintech companies have created APIs to make accessing the ACH network far more seamless than before, modernizing the entry to a dated network. For example, Dwolla’s White Label API contains benefits like:

  • Transferring funds to your customers’ existing bank accounts in a shorter time frame than Standard ACH with Dwolla’s Next Day ACH transfers.
  • Letting your customers receive funds via their existing bank accounts can reduce churn from expired credit cards
  • ACH via Dwolla’s API is more cost-effective than cards and wire transfers.
  • You get to build a scalable subscription model that grows with your customers.
  • Dwolla’s API can be easily embedded into an existing business operation that contains automated payment processes, as well as end-user experiences. In most cases, this can be done in as little as 4 API endpoints.
  • Access to real-time status updates to help with tracking transactions and ensure that compliance is met.

As a Dwolla partner, something I heard from the CEO at Dwolla, Ben Milne, really struck me:

“Small fintech companies want to move through the banking system, but finding a bank, the contract, the tech systems, raising capital — it can be difficult to work with a bank. It took Dwolla two years. We can help businesses get up and running in nine days.

“This simple API packages over 540 pages of ACH operating rules and guidelines, years of strong banking relationships and experience, and a dynamic infrastructure designed to support new business models and reduce a platform’s time to market,” Milne said. “Since July, the demand for a more flexible, robust, and seamless ACH API has fueled our platform’s revenue growth by an average of 30 percent month-over-month.”

With an ACH API, you’re not only able to take advantage of the benefits provided by the powerful ACH Network—like convenience and security—but you are also are able to tap into modern amenities like speed and real-time data.


For more information on Dwolla’s ACH API, check out some additional blog posts:

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