A Guide to ACH Payment Processing APIs for Developers

By  //  August 15, 2023

ACH, short for Automated Clearing House, is an electronic payment system that operates nationwide in the U.S. It enables financial transactions and the transfer of funds from one bank account to another.

What is ACH and how does it work?

ACH transactions are processed in batches, making them a cost-effective alternative to paper checks, and the ideal choice for businesses that deal with high-volume payments and collections.

Customize funds journey with API technology

Development teams are typically able to customize their own payment flow, since the payment APIs provide them with all the tools and endpoints necessary to integrate ACH payments into their applications or websites. Common customization options include:

  • User interface – design own payment forms and pages to match the application or website’s look and feel
  • Integration with accounting systems – integrate API with accounting systems to automate funds journey and streamline financial record-keeping
  • Payment routing – specify how payments should be routed and processed, including setting up workflows for handling different types of transactions or errors
  • Error handling – implement custom error messages and handling procedures to guide users through issues that arise during payment processing
  • Reporting and analytics – build custom reporting and analytics features to track metric, history and other relevant data

Payment API bridges push and pull payments

With an ACH payment processing API, a push payment allows a payer to initiate a transaction to send money to a payee. The payer therefore takes the active role in pushing the money from their account to the payee’s account. On the other hand, a pull payment is when the payee initiates the transaction by “pulling” money from the payer’s account. This is more common in scenarios where recurring payments are involved, such as monthly subscriptions or utility bill payments. 

Disadvantages of an ACH payment processing API

Complex development process

Integrating an ACH payment processing API into an existing system can be difficult and time-consuming. Developers also need a thorough understanding of the API documentation, protocols and security requirements to properly integrate the API gateway. Given the complex nature of the process, it’s not unusual to encounter problems in handling error scenarios, managing exceptions and establishing seamless communication with the payment API. 

Resource requirements

Using a payment processing API will most definitely demand additional resources. After all, the process doesn’t just end with integration. Organizations need skilled developers and IT personnel with expertise in API integration and management, and allocating resources for ongoing monitoring and troubleshooting can strain budgets and human resources. 

Transaction failures & slower processing times

Transactions can fail at times, with reasons being insufficient funds, bad account numbers and disabled debits. It can take up to 5 business days to be notified of the success or failure of the transaction. In addition, ACH payments typically take 1-3 days to clear, and this delay can be a concern for businesses that require immediate funds availability for time-sensitive transactions.