ACH Payment Integration: A 2023 Guide
ACH Payment Integration | ACH API
An ACH Integration Guide – what to look for in 2023.
An ACH Payment Integration offer SaaS platforms and developers the ability to automate payment collection, disbursement and reconciliation using an ACH API [Application Programming Interface]. The ACH option allows debiting/crediting of checking and savings accounts via the ACH network.
Integrating an ACH Payment Processing solution offers your users payment options and benefits. If your product or SAAS offers any kind or recurring payment functionality then an ACH transaction integration needs to be part of your offering. Here is why:
- Credit card decline rates continue to rise. Average recurring credit card billing return rates are around 15%. ACH payment processing return rates are typically sub 2%. Think about 15% of your expected revenue NOT coming in. And you now have to contact those customers to update billing info.
- ACH Processing fees are typically 80-90% less expensive than credit card fees. For many businesses reducing margins by 2.5-3% is significant. Offering an ACH option can increase profit margins.
- Banking checking and savings accounts don’t have expiration dates and are not nearly as susceptible to being closed or re-generated due to data theft. This makes ACH integration of payments an ideal choice for any application or service that has a recurring payments component.
- ACH payments are widely accepted by both consumers and businesses for payment facilitation.
ACH API FAQ’s
- How long should it take for an ACH API Integration? This depends on how “tight” the integration is. Some platforms choose to rely on your payments partners reporting tools that allow for “self-service”. Others choose a deeper integration that auto-reconciles payments. This is especially true of “management” SaaS platforms that provide accounting insight. Time frames can range from a couple of days to 1-2 weeks.
- Can a platform monetize its ACH API Integration? Yes and this is a compelling reason to offer ACH payment solutions. Typically the platform has a “buy-rate”. They would set the ACH pricing to their clients and make the delta
- Do ACH transactions operate like credit cards? No–the credit card rails offer a way to verify the funds on the payers card are available and can be secured. The ACH world operates in a batch environment and the banks involved have 3 days to sort out any potential issues, eg NSF
At AgilePayments We have been ACH API Providers and supplying payment gateways needs of apps and stand-alone software for over 20 years.
ACH Payment Integration has been a core offering and we are the experts. Our specialty is partnering with software or SAAS providers and creating payment solutions that make collecting customer payments simple and efficient. At the same time you generate a new revenue stream without added support burdens.
So what should you look for in an ACH Integration API?
- API availability: Does the partner offer RESTful, SOAP ACH transaction integration or both?
- What other payment utilities are available?
- If your market base includes Canada, does the partner provide a single API for both US ACH and Canadian EFT?
- Does the platform meet PCI Security standards even though NACHA does not require ACH transactions to be PCI compliant?
- Is sensitive ACH data tokenized and can a call be made to immediately tokenize the bank account data prior to an origination?
- Are there opportunities to leverage the ACH Processing Integration for your apps’s revenue stream?
- Are there ancillary utilities available from the ACH API to make calls for anti-fraud and risk mitigation?
- Does the partner provide assistance in ACH payments processing adoption for you and your user clients? Simply offering a payment method is not enough to get end user adoption.
- Are there risk acceptance models available that could lower processing costs?
- Are there white label possibilities that might allow for a branded processing option, keeping the ACH processor behind the scene?
- Is there an API that would allow your customers to apply from your site or app?
- Will your potential partner take the time to understand your business requirements and provide options that custom fit the payments needs to your needs and your clients?
- How long has your potential integration partner been serving the needs of app providers and what is their track record?
- Are there ACH Payfac options available?
- Does your partner have an ACH bank account validation solution available for the 2021 NACHA requirement?
That’s just a start at some of the common questions you might ask. With Agile Payments, we take the time to learn your business requirements and needs first. We have ACH app clients in sectors that span a wide spectrum. In every case we have become a valuable and trusted partner to these providers–to the point where we help in other business areas [eg client acquisition strategies].
Other reasons ACH integration makes sense:
Paper checks simply don’t work for organizations or applications wishing to accept payments from bank accounts. Even if they did, paper checks are burdensome and expensive in handling. If an application provides payouts to affiliates or businesses for services or goods, it’s far less expensive to have an ACH Integration to handle what would be the ACH Credits.
Paper checks are also far more suspect to fraudulent use than anything facilitated via an ACH Integration. ACH Integrated payments eliminate the worry of fraudulent use if remitting payments by paper check.
The ACH network is a batch environment. This means at the time of payment you have no way to be certain the payment will be successful–the vast majority of times it will.
However this can often lead to accounting reconciliation issues where the platform payment reporting and the customer’s bank statements don’t match.
Having sophisticated Payment Deposit Reconciliation tools allows you to reconcile payments deposits directly in your payment reporting suite. The vast majority of ACH API providers DO NOT offer this level of reporting insight.
Creating an ACH payment integration solution leads to more satisfied clients. It can provide a more economical method for streamlining cash flow, and if there are recurring payment requirements as part of your app or market you serve, we are the experts. Predictable, less expensive payment vehicle and API functionality that will empower your software and add value for your user base.
Disputed transactions are less likely with ACH transactions. Credit card transactions can be disputed and charged-back for a number of reasons. That’s not the case with ACH transactions. There are only three reasons that an ACH transaction can be disputed; The transaction was simply not authorized to be debited, the amount was incorrect or the date that it was processed in incorrect. In each of the three cases a formal affidavit must be completed at the bank where the ACH debit was drawn upon.
The recurring cycle of ACH payments just keep going and going. Earlier we discussed credit card expirations, stolen cards, re-issued cards (EMV) and the associated credit card declines. An application with recurring payments requirements that has completed an ACH integration realizes the great benefit of setting up a user for ACH recurring payments and not worrying about declines. They pretty much set it, and forget it as far as the recurring ACH is concerned. The only reasons to interject into a particular user’s account is for a return notification, typically non-sufficient funds. This is where a good ACH API can be valuable. First, understand that rejected ACH transactions have two re-presentment originations available to try to capture what was the NSF funds. Favorable re-presentments vary by business type, but the parameters available should be, Immediate, being delayed by a specified number of days, a smart date such as a logical pay date like the first or 15th of the month, or a specific day of the week, e.g., Friday. The SaaS organization can programmatically manage any NSF returns they get by leveraging retry field parameters via the ACH integration API. Further, the origination of a separate NSF fee transaction can be automated programmatically if the SaaS organization wishes to assess and capture one. That’s a decision that varies based on organizations, but re-trying NSF’s is not; it’s universally accepted.
ACH payments get preferred settlement. Checking and savings account settlements are not treated the same. While each bank may have some procedural differences, ACH transactions are generally the first to be settled and reconciled. For example, If Suzy Jones has a $500 balance in her account and an ACH debit transaction shows up on a Monday morning at the same time a paper check for Suzy’s account is presented, the ACH transaction is the one who gets paid first. Why? Well, you’d have to ask each bank but suffice it to say that if the ACH transaction is rejected for non-sufficient funds, the bank get’s nothing in the way of fees. If they reject the paper check, the bank can assess an NSF fee. Ever heard the term “follow the money”?
ACH Payment API
How an ACH Payment API can help SaaS platforms grow customer base and revenue
ACH Integration and Payment Aggregation
As SaaS applications continue to expand, the rise of payment aggregation has expanded. Not too long ago it was nearly impossible to acquire a merchant account that provided ACH aggregation. That’s no longer the case. Today, ACH Integration is available, and via ACH Integration API’s.
An ACH Payment Aggregator or Facilitator can be thought of as being a Master Merchant who facilitates ACH transactions for sub-merchants within their payment ecosystem. Becoming an ACH aggregator or Payment Service Provider lends itself quite well to some businesses that fall into the software provider classification. Especially those who have recurring payments requirements via ACH integration.
The aggregation model was initially prohibited by credit card associations as well as the third party ACH processors. PayPal grew rapidly, and ultimately there is a lot of money to be made with aggregation, so gradually the attitude toward the aggregation model changed. It became a model that the card associations had to take a look at. While it’s still not widely provided by ACH processors, some have come to embrace the ACH aggregation model because of technological advances in KYC, advanced on-boarding processes and a better overall understanding of associated risks and mitigation processes to manage them.
The On-Boarding process for an Organization who seeks ACH Integration
For many organizations, the on-boarding process is extremely important. To simply have an ACH integration option may not be enough. Many organizations prefer for the on-boarding process to be a “white label” process, where the third party ACH processor remains in the background. This means the ACH integration must provide a way for the organization to pass their merchant’s data that is required by the ACH processor’s underwriting department – ideally with everything in electronic format, including signatures.
This means the API must provide the ability for the application and underwriting process to be presented on their website, as though the ACH payments solution is coming from them, pass the underwriting data to the processor, notify the parties involved where the application stands and pass API credentials to the applicant user once the merchant application has been approved and enrolled. In some cases the credentials are passed to the merchant themselves in the case a SaaS application requires the merchant user to enter API credentials themselves, and in other cases the API credentials are passed to the SaaS organization for entry oh behalf of the merchant. It all depends on the ACH integration path that the SaaS organization chose.
Demand no Data Hostaging
A situation that is becoming common in the credit card world is that of data hostaging. The inability for a merchant to receive non-tokenized card data in the event that they wish to switch merchant accounts. In some cases it’s simply prohibited by the processor. In other cases a merchant must pay exorbitant fees in order to obtain the data. And in some cases the process is a long and arduous process, as processors try to delay the data transfer in order to maximize profits. While ACH transactions do not fall under the same PCI scope as credit card transactions, most ACH processors who value sensitive data and the potential theft of it do tokenize ACH data in the same manner that credit card processors do. So, A, don’t even consider an ACH integration that does not provide the ability to tokenize the sensitive ACH data, and, B, make sure there is a clear-cut inexpensive process for migration of ACH data should you wish to migrate to another processor.
For a payment processor, an SaaS application can become the processor’s defacto sales organization. Many times this is predicated on whether the SaaS organization views the ACH integration as a payments partnership or remain in the all too common developer mentality of waiting to consider payment integration until near the end; Choose a quick integration and be done with it. While a payments partnership can be a complex agreement, the basics are that an agreement is made where the SaaS organization and it’s using clients is acceptable with the rates agreed upon, and the processor can still find profit. Revenue share percentages can vary widely based on the reach and user base of the SaaS organization, but do your best at leveraging your application and it’s base in order to realize profit for yourself. After all, in a payments partnership, it’s your organization that is creating the leads for the processor.
Combined with our revenue share model for integrated partners you can drive significant bottom line growth to your business. You know your user base and/or the potential it has. Just considering ACH transaction volume, what would just 10 cents per transaction do to your bottom line?
Contact us to discuss your ACH Payment Integration options. Agile Payments has been around for 18+ years, with focus on software applications that require payment integration. Most specifically, recurring payments. We are hear to listen to all your ACH integration requirements and formulate the best options for your organization. If we think there’s someone else who can better serve your needs, we will be the first to tell you.