ACH

What is an ACH payment?

ACH stands for Automated Clearing House, a network that enables electronic payments and money transfers between banks in the United States. ACH payments allow customers to transfer funds directly from their bank accounts to another’s, providing a seamless and cashless experience.

How ACH works

Here’s what an ACH transaction looks like from start to finish. The entire process typically takes under a 20 seconds:

  1. Customer initiates payment

– Online: The customer places an order on ecommerce platform and selects the ACH payment option, often facilitated by a third-party provider like myfriendlypay.

– In-store: At the checkout counter, the customer chooses ACH as their payment method, either through a QR code or payment link.

  1. Payment is authorized

– Customer authorization: Customer provides their bank account details and authorizes the transaction. This may involve logging into their bank account through a secure payment portal or linking their bank account to the payment provider’s system.

– Verification: For first-time users, a one-time setup will verify and link the bank account, ensuring the legitimacy of the account details provided.

  1. Transaction is submitted

– Payment request sent: Once authorized, the payment request is sent from the point of sale system to the ACH network via the payment processor.

– Data encryption: Customer’s bank details and transaction information are encrypted to ensure security and compliance with regulatory standards.

  1. Clearing and settlement

– Clearing house processing: The ACH network processes the transaction by debiting the customer’s bank account and crediting the others bank account. This process involves several intermediary banks and can take no longer than 1-3 business days.

– Batch processing: ACH transactions are processed in batches at scheduled intervals throughout the day, unlike real-time transactions with credit cards.

  1. Notification of payment

– Confirmation to customer: The customer receives a notification (email or SMS) confirming the successful initiation of the ACH payment.

– Confirmation to dispensary: The payment system updates the order status to reflect that payment has been initiated or completed, depending on the stage of the transaction.

  1. Settlement

– Funds transfer: The funds are transferred from the customer’s bank account to the other’s bank account. This is usually completed as quickly as a couple hours or may take up to two business days.

– Bank reconciliation: Both the customer’s and the other bank statements will reflect the ACH transaction, aiding in reconciliation and record-keeping.