Seated in his office, a businessman wears a smile as he utilizes ACH payments for swift and efficient payment processing.

The Explosion of ACH Payments Adoption and What Merchants & Resellers Need to Know

June 23rd, 2023

Merchants and ISO resellers are quickly adopting ACH payments because of its lower processing fees to save merchants money, higher margins for resellers, convenience fee alternatives and cash discounts.

Businesses continually seek innovative solutions to meet the diverse needs of their customers. As a merchant or reseller in the payment processing industry, automated clearing house (ACH) payments help stay ahead of the curve by offering different payment options to customers.

While credit cards remain popular, the market is changing, and businesses are increasingly seeking alternative payment methods. By offering ACH payments, merchants and resellers can attract a broader range of clientele, meet payments demand, diversify their revenue streams and maximize profitability.

Merchants are eager for a lower cost payment processing alternative to help streamline their business and save money. Our merchants and resale partners can diversify revenue streams and offer value-added services like fraud detection and risk management solutions, comprehensive reporting tools, and dedicated customer support.

Cost Savings and Billing Opportunities

With a card and mobile phone in hand, the businessman is prepared to make a bank-to-bank transfer payment, leveraging the benefits of ACH convenience fees for customers.
ACH payments involve direct bank-to-bank transfers, thus avoiding the need to credit card payments and fees.

Profitability is key for ISOs and resellers regarding payment processing. By offering ACH as a payment option, ISOs and resellers can take advantage of the following:

1. Lower processing fees for ACH payments

Credit card transactions often incur higher processing fees due to interchange and assessment fees. On the other hand, ACH payments involve direct bank-to-bank transfers, eliminating the intermediaries during credit card processing.

In addition, merchants can add a surcharge to ACH payments, lowering the cost of processing and saving money for their consumers. This strategy also allows resellers to leverage the cost savings generated by ACH and offer those savings as an incentive to their merchants.

2. Lower convenience fees – YES we can do that

When customers make payments using credit cards, many merchants leverage convenience fees to cover the costs associated with processing those transactions. Credit card processing fees are often calculated as a percentage of the transaction value, usually around 3%.

This same model can be applied to ACH transactions. The lower cost of ACH payment processing allows cost savings to be passed onto the consumer. ACH payment fees are lower and can range from 0.5% to 2.5%, or even a flat dollar fee.

By offering ACH payments with reduced or no convenience fees, consumers are far more likely to pick the lower cost of ACH at checkout, helping merchants and resellers to attract more customers with this payment method. Many are already doing this, which has led to an explosion of ACH adoption.

3. Contribution of lower fees to higher profit margins

The reduced fees associated with ACH payments directly and positively impact the cost of processing for merchants and consumers. Merchants can reduce operational costs by offerings ACH payments to their customers, whereas ISOs and resellers offer savings opportunities for their merchants, creating “stickier” clients and a win-win business strategy.

Profitability allows merchants and resellers to invest in technology upgrades, expand their service offerings, and attract and retain top talent. It includes adopting emerging technologies, enhancing security measures, and developing innovative solutions.

By maintaining profitability, merchants and resellers can continuously improve their services, meet evolving customer demands, and differentiate themselves from competitors. By offering ACH to merchants with all these business benefits, those merchants are more likely to trust ISOs and resellers with a proven track record of profitability, leading to stronger partnerships and long-term relationships.

The Difference between ACH & Credit Card Convenience Fees

ACH (Automated Clearing House) is a network for financial transactions in the United States. Convenience fees for ACH payments are either fixed percentages of the transaction value or flat dollar amounts, covering processing costs and offering added convenience to the payer.

On the other hand, credit card payments involve using credit or debit cards issued by financial institutions incur much higher costs to the merchants. Convenience fees associated with credit card payments are added to the transaction amount and cover the costs incurred by the business. The convenience fees can be fixed percentages, depending on the merchant’s policies.

The average interchange rate for cards is up to 2.8% in 2023, putting pressure on merchants, their customers and resellers. ACH payment processing offers a solution for all three depending on the business agreements and specific transaction details, risk factors, industry and volume.

How ACH payments cater to customer needs and drive business success

ACH payments enable customers to set up recurring payments for subscriptions, memberships, utilities, and other regular expenses, eliminating manually initiating payments.

It also allows customers to make payments directly from their bank accounts, streamlining the payment process and removing the need to remember complex passwords associated with online wallets.

Recurring Revenue Opportunity

ACH payments provide a convenient and reliable solution for businesses to collect recurring customer payments. Whether monthly subscriptions, installment plans, membership fees, or utility bills, ACH payments offer a seamless and automated process for recurring billing. Customers appreciate the ease and convenience, encouraging them to stay committed to the service or subscription, resulting in stable revenue streams.

With recurring billing models, businesses can accurately forecast their revenue and financial obligations, enabling better financial planning and decision-making. In addition, compared to credit card transactions that incur higher fees, ACH payments involve lower transaction costs, resulting in improved profit margins for businesses over the long term.

By selling ACH payments and providing value-added services to merchants, ISOs and resellers can enhance their revenue streams, ensure customer retention, provide predictable cash flow, and solidify their position in the payment processing industry.

Market Demand

ACH payments have been the incumbent choice payment processing solution for government, tax collection and utility payments. However, ACH has gained significant traction across B2B sectors such as construction, distribution, manufacturing, wholesale, commercial funding, collections and buy-now-pay-later services.

By understanding the unique needs and challenges of B2B sectors, ISOs and resellers can offer specialized ACH payment services that address specific requirements, establishing themselves as trusted partners. ISOs and resellers should seize the opportunities presented by ACH payments. VCI is uniquely positioned to help merchants, ISOs and resellers navigate this landscape.

Our expertise in ACH payment processing, innovative solutions and niche industries coupled with our commitment to customer success make us an ideal partner for expanding payment processing offerings. Contact us today or call us at 844.980.4VCI for customizable payment processing solutions to drive increased revenue, business growth, and customer satisfaction.