Even though many people use the terms ACH and EFT interchangeably, they’re not the same. ACH payments are just one of many types of electronic fund transfer (EFT).
Understanding how EFT and ACH work and where they differ can help you determine whether your business should accept these payment methods.
What Are ACH Payments?
An ACH transaction moves money between financial institutions when someone makes a purchase. ACH stands for Automated Clearing House, the network that facilitates these transfers. Examples of ACH payments include:
- Payroll direct deposit
- Automatic bill payments
- Social Security and other government benefits
Your ecommerce shop can accept ACH payments at checkout. If your customer selects this option, the money will transfer from their bank account to yours with the help of the ACH network.
How Do ACH Payments Work?
ACH connects all the banks, credit unions, and financial institutions in the U.S. It sends payments between these institutions in several batches throughout the business day. Global ACH payment processing takes place through associated networks such as Single Euro Payments Area (SEPA), which serves the European Union.
Once the customer's bank account sends a payment through the ACH network, it could take another day or two for the money to show up in your merchant account.
The National Automated Clearing House Association (NACHA) ensures the security of ACH transactions. NACHA has a detailed verification process, so ACH payments are safer than credit cards.
What Are EFT Payments?
EFT describes all payments that take place through digital networks, including:
- Transactions with digital wallets like PayPal
- Wire transfers
- ATM withdrawals
- Direct paycheck deposits
- Online bill payments
- Ecommerce transactions
- Pay-by-text systems
More than 82% of Americans use EFTs each year, so they're by far the most common payment method in the US. ACH payments fall under the umbrella term of EFT, but not all EFT payments use the ACH network.
In the US, the federal Electronic Funds Transfer Act (EFTA) provides consumer protection from EFT fraud. EFTA applies to most EFTs including ACH payments, but not to wire transfers.
How Do EFT Payments Work?
EFT payments don't require manual authorization, so they usually go through right away or within a few minutes. The customer authorizes the transaction by entering a secure password or PIN for contactless payments. They can also present a physical credit card for in-person EFT purchases.
You'll get a notice from your payment services provider when someone uses an EFT at your online store. This receipt will also indicate whether the funds have arrived or the transaction remains pending.
Under federal law, companies that accept electronic credit and debit card transactions must adhere to PCI DSS.
Pay.com has Level 1 PCI DSS compliance, so when you choose us as your payment service provider, we save you the hassle of having to meet the requirements on your own.
The Main Differences Between ACH and EFT
Scope is the main difference between ACH and EFT payments. EFT is a broader term that applies to all types of electronic payments. ACH is one distinct subtype of EFT, referring only to payments that take place through the ACH network.
While most EFT payments transfer immediately, ACH transactions take longer. That's because ACH payments go through in batches while EFTs go through one-by-one in real time. On the other hand, ACH payments usually have lower fees than other forms of EFT. Both methods take less time than traditional paper checks.
Most EFT payment methods provide an immediate decline if the customer's account can't cover the transaction. ACH payments may go through even if the account has insufficient funds, but the customer's bank will reverse the charges within a few days.
ACH transactions also add an extra processing step. EFT payments can go straight from one bank to another or between two accounts within the same bank. ACH payments also transfer between banks, but they go through the Automated Clearing House network along the way.
The Benefits of Working with Pay.com as Your Payment Service Provider
Pay.com's full-service payment infrastructure has everything you need to create an outstanding user experience at checkout. You can use our no-code solutions and customize a checkout page to fit your needs or use our APIs to integrate our payment components with your existing platform. Both options are easy to set up and use.
We prioritize security and comply with Level 1 of PCI DSS. You'll be able to update your checkout page with official badges to let your customers know you protect their private payment information.
The Bottom Line
You can increase conversions and sales by accepting multiple payment methods, including EFTs like ACH payments and digital wallet transactions. EFTs offer a secure, cost-effective way to take payment for your products and services. Although ACH payments are slower than many other forms of EFT, they also have an extra layer of security.