Article
ACH payment processing: A guide for UK businesses selling in the US
ACH is how US consumers and businesses pay by bank. This guide explains how it works and what UK businesses should know before offering it.
For UK businesses selling in the US, Automated Clearing House (ACH) payments offer a reliable, low-cost way to collect money directly from customers’ bank accounts.
If you already collect payments by Bacs Direct Debit, the principles will feel familiar. Money moves directly between bank accounts, usually at a lower cost than card processing, and the model suits recurring billing well.
However, the rules, timings and terminology differ, and getting them right will affect both your costs and your cash flow.
This guide explains how ACH payment processing works, what can slow payments down and how ACH compares with wire transfers, so you can decide whether to offer it to your US customers.
In this article:
ACH payments explained
How NACHA governs the ACH network
The ACH payment processing cycle
Common ACH payment processing delay reasons
The benefits of ACH payment processing for UK businesses
ACH vs wire transfers
How Adyen supports ACH payment processing
What are ACH payments? How the US pays by bank
ACH payments are a form of electronic fund transfer (EFT) that moves money directly between bank accounts over the Automated Clearing House network. With online ACH payment processing, businesses can collect and send these payments securely and at a lower cost than card payments.
ACH payments include the following methods for direct routing of funds:
Direct debit: The merchant pulls money from the customer's bank account with prior authorisation, ideal for subscriptions and utility bills.
Direct deposit: An entity pushes funds into a bank account, commonly used for payroll, tax refunds, and government benefits.
B2B transactions: Companies pay vendors and suppliers directly, bypassing traditional invoice processing delays and high transaction costs.
What is the NACHA network? The rules behind US bank transfers
The National Automated Clearing House Association (NACHA) governs the ACH network, setting the rules that financial institutions in the US follow when moving money between accounts. The ACH network offers a secure, digital alternative to paper cheques and card payments, and is widely used for direct deposits, payroll, B2B transfers, and consumer recurring payments.
Common ACH Standard Entry Class (SEC) codes
The NACHA network establishes rules and guidelines that govern the entire ACH ecosystem, ensuring consistency and security across thousands of financial institutions. Transactions on the network are categorised by Standard Entry Class (SEC) codes, which define how the payment authorisation was captured. Common SEC codes include:
PPD (Prearranged Payment and Deposit): Used for direct deposits (such as payroll) or pre authorised consumer debits.
WEB (Internet-Initiated Entry): Used when a consumer authorises a debit payment via the internet or mobile devices.
TEL (Telephone-Initiated Entry): Used for payments authorised over the phone.
CCD (Corporate Credit or Debit): Used primarily for business-to-business (B2B) transactions and cash concentration.
How does ACH payment processing work? From authorisation to settlement
ACH payment processing works by batching transactions and routing them through an ACH Operator to be cleared and settled between the originating and receiving financial institutions.
Unlike card payments, which are authorised in real time at checkout, ACH transactions are collected and processed in batches throughout the business day. Batching lets the network handle large volumes of payments securely and efficiently.
The ACH network supports both standard ACH and same-day ACH processing. While standard ACH payments typically settle in one to three business days, same-day ACH allows for much faster clearing. NACHA has established three daily clearing windows for same-day ACH, letting financial institutions submit files for same-day settlement. This is particularly valuable for urgent payroll processing, same-day bill payments, and quick B2B payouts.
To initiate and manage these transfers at scale, businesses typically use an ACH payment processing API to connect their systems with financial networks, following a series of standard steps:
Authorisation: The customer grants permission to the merchant to initiate a debit or credit transaction, providing their bank routing and account numbers. This authorisation must be stored securely by the merchant for compliance purposes.
Origination: The merchant sends the transaction details to their bank, known as the Originating Depository Financial Institution (ODFI).
Batching: The ODFI collects all ACH requests into batches and sends them at scheduled times to an ACH Operator, such as the Federal Reserve or The Clearing House.
Distribution: The ACH Operator routes the transactions to the customer’s bank, known as the Receiving Depository Financial Institution (RDFI).
Settlement: The RDFI verifies the availability of funds, processes the transfer, and settles the funds between the respective accounts.
ACH payment processing delay reasons to plan for
While ACH transfers are highly reliable, several factors can cause unexpected processing delays. Understanding these common hurdles helps businesses manage customer expectations and maintain steady cash flow. The most frequent reasons for ACH payment delays include:
Incorrect banking information:
Errors in routing numbers or account numbers are a leading cause of delays. If the details don’t match the receiving bank’s records, the transaction will be flagged or returned.
Insufficient funds (NSF):
If the customer’s account doesn’t have enough funds at the time of the debit, the RDFI will return the transaction, requiring a manual or automated retry.
Banking holidays and weekends:
The ACH network only operates on business days. Transfers initiated on Friday afternoons, weekends or federal holidays won’t begin processing until the next available banking day. Note: US federal holidays differ from UK bank holidays, so it’s worth planning billing cycles around the US calendar.
Fraud flags and account freezes:
Large or unusual transactions may trigger automated security reviews by financial institutions, temporarily pausing the transfer to verify the legitimacy of the funds.
The benefits of ACH payment processing for businesses selling in the US
Offering ACH gives businesses selling in the US these strategic advantages:
Lower transaction costs: Card payments can cost up to 3% of the transaction value, while ACH payments usually carry a low, flat-rate fee. That difference adds up quickly on high-value transactions.
Automated recurring billing:
Automation cuts the work of manual monthly invoicing and follow-up, helping ensure payments are collected on schedule and improving working capital.
Lower involuntary churn:
Fewer payment failures from lost, stolen or expired cards help keep services running. Since bank account numbers change far less often than card numbers, subscription businesses benefit from a more stable revenue stream.
Stronger security:
Direct bank-to-bank transfers remove the need to store cardholder data, lowering fraud risk. Bank verification processes and NACHA rules also help protect both buyers and sellers from unauthorised activity.
ACH vs wire transfers: Which suits your US payments?
The main difference between ACH and wire transfers is that ACH transfers are processed in batches and usually take one to three business days, while wire transfers are processed individually in real time and domestic wires typically complete on the same day.
ACH transfers are also generally much cheaper or free, while wire transfers carry higher fees. Wire transfers are typically preferred for urgent, high-value or international payments, whereas ACH is ideal for automated, high-volume recurring transactions within the US.
How Adyen supports ACH payment processing
ACH payment processing with Adyen lets businesses accept direct bank payments, optimise authorisation rates and manage risk through a unified platform. Adyen simplifies ACH payments by automating the verification process, letting merchants verify bank accounts instantly and securely. This reduces the risk of failed transactions due to incorrect account details.
Our platform supports businesses in scaling their operations and offering a smooth payment experience:
Instant bank verification: Verify customer bank accounts in real time to prevent fraud and help ensure payments succeed. This is done through secure verification networks, removing the need for manual micro-deposit verification, which can take days.
Unified Commerce integration: Manage your ACH transactions alongside cards, mobile wallets and other payment methods in one dashboard to simplify reporting, reconciliation and customer support.
Smart retry logic: Automatically retry failed payments at optimal times to maximise recovery rates and reduce churn. This intelligent retry engine uses historical transaction data to determine the highest-probability settlement times.
Are you ready to lower your transaction costs and streamline your recurring billing?
Get in touch today to learn how Adyen can help you implement a secure, cost-effective and fully automated ACH solution tailored to your business needs.
Summary
ACH payment processing lets you transfer funds directly between US bank accounts, offering a secure alternative to paper cheques and card payments.
Transaction costs for ACH transfers are typically much lower than card processing fees, making ACH ideal for high-ticket and B2B transactions.
Collecting recurring payments by direct debit reduces involuntary churn caused by expired or lost cards, boosting long-term customer retention.
Partnering with a payments provider like Adyen automates account verification and retry logic, helping you run operations more smoothly.
FAQ
ACH payments typically take between one to three business days to settle, depending on whether they are processed via standard or same-day ACH. Same-day ACH lets you process payments on the same business day if submitted before network cutoff times.