As the costs of processing credit card payments continue to rise, more merchants are seeking cost-effective alternatives to protect their bottom line. One solution gaining significant traction is the use of Automated Clearing House (ACH) payments, the tried-and-true pay by bank solution. Once seen primarily in business-to-business transactions and payroll systems, ACH is rapidly making its way into consumer retail transactions, offering a compelling alternative to traditional credit and debit card payments.
According to the National Automated Clearing House Association (NACHA), ACH payment volume surged by 7.6% in 2024, with consumer-related volume valued at a staggering $27.4 trillion and representing approximately 76% of total ACH volume. This growth is being fueled by several key factors, with cost efficiency at the forefront.
Credit card transactions typically cost merchants anywhere from 1.5% to 3.5% of the transaction value in processing fees. In contrast, ACH transactions usually come with a flat fee that ranges between $0.26 and $0.50 per transaction, depending on volume and provider agreements. To illustrate the savings: on a $100 transaction, a merchant may pay as little as $0.26 via ACH, compared to up to $3.50 with a credit card. That’s a savings of over $3 per transaction, an impactful difference when multiplied across thousands of daily transactions for merchants who often manage to a net profit margin of approximately 3%.
With retail margins under growing pressure due to inflation, rising labor costs, and shifting consumer behavior, this reduction in payment processing costs can significantly improve profitability. Yet despite the advantages, some merchants are cautious about promoting ACH payments due to concerns about consumer adoption and the perceived risks of non-sufficient funds (NSF) or overdrafts associated with ACH.
However, new technologies and strategies are making ACH payments not only viable but advantageous:
- Access to a Broader Customer Base: An estimated 20% of U.S. adults do not have a credit card, according to the Federal Reserve. By accepting debit and ACH payments, merchants can serve customers who may otherwise be excluded from digital transactions.
- Changing Consumer Preferences: Consumers increasingly seek ways to manage debt more effectively. Paying via ACH helps them avoid accruing interest or reducing available credit lines, making it a more financially responsible choice.
- Incentivized Behavior: Merchants are finding success in encouraging ACH payments by offering discounts, rewards, or other incentives that rival or exceed typical credit card perks while providing perks that are not currently available with most traditional bank debit card programs. These promotions can drive customer loyalty while saving merchants on fees.
- Enhanced Risk Management: Modern ACH providers now offer tools such as payment guarantees and overdraft protection. These services mitigate the risk of NSF transactions, allowing merchants to implement ACH without the need for real-time fund verification.
By integrating ACH payment options, merchants are discovering new avenues to reduce operating expenses, attract a wider audience, and deliver more value to consumers. As merchant adoption grows, ACH is poised to play a more prominent role in the retail payment ecosystem by delivering both financial and strategic benefits to merchants that are ready to embrace change and actively manage their expenses and overall profitability.
To discuss what pay by bank options may be best for your business, contact us at info@payments-roundup.com.
End Notes: