When there was the need for faster payment processing alternatives, Same-day Automated Clearing House came as one of the leading options. And it has been so to date, however, there’s the question of whether it is a perfect fit or not for acquirers.
Despite ACH’s cheaper service fee compared to the use of credit cards, the existing discrepancy may not be persuasive enough to get merchants who are contented with mobile wallets and cards on their side. However, same-day ACH can still boast of a dedicated audience — having delivered a jaw dropping 13 million transactions in the last quarter of 2016 — and its increasing popularity among businesses and government agencies.
Certainly, direct deposit or B2B transactions formed a larger percentage of the traffic, leaving others in the merchant acquiring business in a dilemma on how to go about a cheaper, but possibly riskier, payment alternative for their consumers.
Perhaps those who are still waiting to see if technological innovation comes up with something better may be taking the best approach. While some are sure that the increasing number of networks that allow person-to-person payments will render same-day ACH a redundant option.
In a statement, Jeremy Epstein, the Managing Director of technology at PrivateBank said that many other processors are now offering, more or less the same kind of solution. He added that ACH is losing its unique selling point and therefore won’t be a major revenue driver as expected. Jeremy however acknowledges the fact that processors who don’t offer ACH are losing because some merchants are need of it.
According to Epstein, since same-day ACH is increasingly well-liked as an integrated solution, it remains a perfect service for an acquirer due to its cost effectiveness—merchants pay a fixed fee and not a percentage of each interchange. He further says that merchants may hasten the shift to same-day ACH so as to accommodate customers with checking accounts but lack cards and would still like to make electronic payments.
Though, with ACH also come a few risks. Just like any other new product in the market, it is vulnerable to fraud. Fraudsters often use stolen credentials to open fake checking accounts which they use to initiate ACH transfers. And there is the danger that a same-day transaction may be processed before a bank verifies that funds exist in the account.
Nevertheless, Fast ACH is way safer than credit cards because it does have a similar type of authorization and verification to that of credit cards. ACH only looses hundreds of millions when credit cards lose hundreds of billions. But is reason enough to get acquirers add ACH to their portfolio?
At the end of the day, the success of your ACH depends on how many of your clients wish to use it for making purchases. Same-day ACH is an ideal fit for payroll deposits and for merchants who need to make faster payments to their vendors.