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How do online payments via ACH debit work?

The process for accepting payments via ACH debit can vary significantly, depending on two key factors.

The process for accepting online payments via ACH debit can vary significantly. It is largely influenced by:

  • Whether your business accesses the ACH scheme directly, or goes through an intermediary

  • The countries that your business’ bank and customer’s bank are located in (Note: This guide focuses on transactions between US-based businesses and US-based customers)

In simple terms, ACH debit is a payment method which allows your business to collect funds owed by your customers, without your customer (the payer) needing to initiate the payment. (This kind of mechanism is referred to as a pull-based payment method, as you - the payee - can pull the funds directly from the payer's account.)

Once a business sets itself up to accept ACH debit (AKA Direct Debit) payments from customers (whether directly or through an intermediary), the process to collect those payments looks like this:

  1. The customer completes the merchant’s checkout process and elects to pay via ACH debit.

  2. The customer is provided and completes an ACH debit authorization form (which may be online, paper-based, or via telephone).

  3. The business (or the business’ ACH debit provider - e.g. GoCardless) submits the completed mandate to the bank, authorizing them to automatically collect payment when it’s due.

  4. The business notifies the customer of the upcoming payment that will be collected from them, in a specified time in advance (learn more about the rules surrounding this in our guides to ACH authorization forms and Customer payment notifications).

  5. The business submits a payment request via the ACH scheme.

  6. The business’ (or ACH debit provider’s) sponsor bank (the bank that enables them to access the ACH scheme) and customer’s bank action the payment request when the payment becomes due, ensuring the correct amount is debited from the customer and credited to the business.

  7. There is typically a clearance period between the payment due date and the date the funds are deposited into the business’ account (see our guide to ACH payment processing times).

Bank debit schemes around the world

For more detailed, region-specific information about bank debit schemes around the world, check out the following resources:

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