While both systems use ACH to process electronic transactions, there are critical variances between them, such as the following: While Direct Payment deals with electronically transmitting payment instructions between financial institutions through the ACH network. The two main branches of ACH payments include Direct Deposit and Direct Payment.ĭirect Deposit caters to every deposit payment from companies or governmental agencies to an individual, including payroll (get insights into full payroll guide), employee expense reimbursement, government benefits, tax, and other refunds, annuities, and interest payments. These payments, commonly known as ACH transfers or ACH transactions, go through the ACH network instead of card networks like Visa or Mastercard. With that vital data and the definition of ACH noted, let’s look at ACH payments, what they are, and why they’re becoming fashionable these days.Īn ACH payment is a bank-to-bank computer-based digital payment that can reach all U.S. And the network has demonstrated steady growth – with 7.6 billion payments processed at $19.2 trillion in the third quarter of 2022, representing increases of 4.2% and 6%, respectively, from 2021. On transaction volume, industry records show that ACH moved over $72.6 million worth of financial transactions in 2021 alone. Nacha (previously NACHA - National Automated Clearing House Association) runs the network, and the system has been around since the 1970s. What is ACH?Īutomated Clearing House (ACH for short, or ACH network/ACH scheme) is a network that facilitates money transfers between bank accounts electronically across the U.S. We’ll dive into all the “whats” and “hows,” including causes, prevention strategies, and the impact of ACH chargebacks on businesses to ensure you’re not disadvantaged. If you’re hearing about ACH chargebacks for the first time, don’t worry. Like traditional chargeback issues, ACH chargebacks can have severe consequences on business, not limited to significant financial losses but even legal action. Estimates show that in 2020 alone, there were over 900,000 ACH chargebacks, amounting to $1.2 billion in losses. According to a report by the National Automated Clearing House Association (NACHA), the number of ACH Chargebacks has steadily increased over the past few years, resulting in millions of dollars in business losses. The primary sources of ACH returns include administrative returns, authorization revocation, duplicate entries, email phishing scams, and insufficient funds.ĪCH chargebacks (or, more accurately, ACH returns) are becoming increasingly prevalent in the financial industry.

Although not covered under the Fair Credit Billing Act, ACH transactions are not immune to chargebacks, popularly called ACH returns. TL DR: ACH payment is a bank-to-bank computer-based digital payment that can reach all U.S.

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