opinion

Businesses Increasingly Using ACH Transactions

Stewart Tongue

One of the most refreshing aspects of working in the adult online industry is the fact that people come to it from such a diverse set of backgrounds and evolve their skill sets to successfully navigate the challenges of selling entertainment online. Payment processing via credit cards, wires and traditional paper checks are routine practices most people are already familiar with, having an understanding of the many other forms digital payment can take is an easy way to add efficiency to your business.

Automated clearing house (ACH) is an electronic network for financial transactions that batch processes large volumes of direct debit transactions. ACH transactions include direct deposits for payroll, vendor payments and consumer payments. Businesses are increasingly using ACH online as an alternative payment option for customers without credit cards, or as a way to pay affiliates and vendors who prefer not to receive wires or paper checks.

In the instance where a customer does not have credit cards it would be a perfect fit for them, it is also a good option to have in addition to traditional processing as an alternative payment type. -Karen Campbell, OrbitalPay.com

CONSUMER TRANSACTIONS:

“ACH/online check payments have been a useful payment platform for some time now,” said Mitch Farber, president and CEO of NETbilling Inc. “NETbilling has offered ACH/online check solutions to our merchants for many years and the clients that offer this payment method as a secondary method to credit card payments typically see great success. The one problem with ACH/online checks is that even though we are able to fraud-scrub the transactions, unlike credit card authorization, ACH is not able to be authorized in real time. This poses a problem with accounts that may have insufficient funds for example. However, bank responses, even though not yet in real time, are often fast enough for products being shipped, and it is easy for a merchant to wait for shipment until the funds clear.”

Some paysite owners have tried to hold back access in ways that work for tangible product sellers.

“I know some affiliate programs that accept ACH or checks but don’t allow access until the check clears, which is normally three business days, that alleviates some of the risk of taking checks, but because what this industry sells is a product that the consumer would prefer access to right away, it may not be the best solution for digital consumers,” said Mark Greenspan, president of WebmasterChecks.com. “Checks are around eight percent or so of many program’s volume, so right now, as far as best consumer payment option, ACH/online checks are not quite there yet.”

While ACH may not be the best payment option all the time, it may be the only payment option a consumer can use sometimes.

“In the instance where a customer does not have credit cards it would be a perfect fit for them,” said Karen Campbell, vice president of OrbitalPay.com. “It is also a good option to have in addition to traditional processing as an alternative payment type. Typically the monthly costs to have the ability to accept ACH are low, so why not? It does take a few days to clear an ACH transaction, so it is best suited for tangible product and the key is to not deliver a product until the ACH clears. That way the only thing you have lost if it doesn’t clear is some bandwidth.”

BUSINESS TRANSACTIONS:

As each new technological improvement reaches the marketplace, communication and the speed of business continues to become faster. Prior to the mid 1970s and widespread use of the fax machine, companies used to use envelopes via postal carrier to slowly send or receive documents and payments.

In the small rear-view window of the last 40 years communication has accelerated to the point where text messages, emails, mobile phones and the always on mentality of most entrepreneurs have created an environment where communication is now immediate. However, until very recently, especially in high-risk industries where services like PayPal seem to frown on the idea of accepting fees from businesses, the speed of payments continued to lag behind the speed of communication for many.

“Unlike the consumer side, where accepting ACH transactions from customers, typically has a high return rate due to not being able to get real-time confirmations from the consumer’s bank,” Greenspan said. “On the business side, with what we do, which is send ACH transactions to affiliates, models, etc., there is a much smaller return rate.”

Other digital payment platforms that had been off limits in the past may soon also be useful tools for adult businesses as well.

On the consumer side, EU-based adult businesses have reportedly made some inroads using PayPal for purchases through Epoch. Also, on the business side, the new Chase Bank Quickpay system requires either party of the transaction to have a Chase account and both parties to be U.S. based, but does not specifically prohibit B2B transactions by adult companies. It would appear, thanks in large part to ACH, that in 2013 the speed of payments is finally catching up to the speed of communication.

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