What is ACH Processing? A Very Underused (and Beneficial) Form of Payment

ACH processing by Instabill

What is ACH Processing? A Very Underused (and Beneficial) Form of Payment

What is ACH processing? It is a system that allows money to be transferred electronically to the company or individual’s deposit account. The communication network for ACH transfers uses the Federal Reserve Banking system to transfer money to and from your savings and checking accounts. A major number of banks in the US participate in the ACH processing network and are bound by certain rules and regulations.

A Brief History on ACH Payment Processing

Set up during the 1970’s, ACH payment processing is a solution for the large number of checks being processed on a regular basis. Initially, it was the large companies and major establishments who started using it but with the development of affordable new software, ACH transaction processing became accessible to a broader spectrum in the business world. To route transactions it is, however, necessary that the selected software for the ACH transfer network holds an agreement with some financial institution.

ACH Processing Coming of Age

ACH processing allows businesses to collect recurring payments without waiting for a physical check. The transfer of funds is accomplished electronically once the customer authorizes the electronic debit. ACH transactions take 2 to 3 days to be confirmed and validated, but NACHA, the Electronic Payments Association, is rolling out phase one of same day ACH transactions in September of 2016.

2 Forms of E-Payments

There are two forms of e-payments by which money can be transferred:

  1. Wire transfer and
  2. Automated Clearing House (ACH Processing)


Designed to handle time-crucial payments and high-dollar between large banks, wire transfer is an electronic payment system that allows payments to be processed electronically.

Unlike the wire transfer, ACH payment processing allows high volume payments to be processed hassle free within a couple of days. The ACH files received daily from member banks are sent to the clearing house and are later divided by the originating and the paying bank. The credits, deducts and accounts are then totaled and processed accordingly.

At Instabill.com, we provide merchant accounts with ACH payment processing. Our flexible software is not only easy to use and secure, but it also gives a safe access to ACH payments. The transactions you make with ACH processing are secure and less expensive than those made by using credit cards.