Fintech is a growing industry that now encompasses numerous verticals. These include banks that offer instant mortgage approvals, mobile apps allowing you to pay for various subscriptions or online loan providers who make their services available online or through an app, and many others. One vertical that a lot of software developers are looking at right now is the business-to-business (B2B) vertical.
What’s on the Market?
Consumers, especially millennials and younger, are used to services like Venmo, Zelle, and PayPal. They can make payments almost instantly to businesses or send money to their friends and family almost instantly.
However, the business world conducts business using the Automated Clearing House (ACH) network. Although it has been around for more than five decades now, it is still the de facto payment network for businesses. Why is this?
Acceptance
First, it is widely accepted in the United States. Banks and credit unions in the United States rely on the ACH network for transactions. Its utilization is so high that some of the apps we use today rely on the ACH network for transaction completion. For example, if you would like to fund your digital wallet using your bank account, or vice versa, you would use the ACH network even if you do not know it.
Reliability and Stability
Second, it is highly reliable and stable. It is a secure and dynamic payment option with services built on top of it to make it even better and more secure. For example, account verification services that go hand in hand with ACH debits allow these transactions to be safer and faster. Account verification also allows businesses to get paid by ensuring the client has the funds they say they do in their account. All this is done with the customer’s or client’s privacy taken into serious consideration.
Cost
Third, it has very low transaction costs. The transaction costs can be as low as a few cents for every transaction. This is much lower than credit cards which can be ten to twenty times higher or checks that can cost up to $40.
The Role of ACH In the Fintech Revolution
Because of how ubiquitous it is in business transactions and how many institutions use it, it is almost impossible to build a banking or transaction app without keeping ACH in mind. Banks already use it, so developers have to integrate it into any apps they build.
This applies to all use cases ranging from depositing funds into digital wallets, allowing peer-to-peer transactions or rambling the purchase of cryptocurrencies.
Second, businesses have been looking for a way to get their funds faster. Same-day ACH transfers, although not instantaneous, allow businesses to receive their funds on the same day. This can be incredibly useful for businesses that receive ACH payments from a variety of sources and need these funds to ensure positive cash flow daily.
Third, international ACH transfers now allow ACH payments through international borders which can help businesses accept payments no matter where they or their customers are. This option can be built into any fintech product developed in the future.
Although some may look at the ACH network as a relic from the past, it remains one of the most important financial networks in the USA. It has already played a role in the development of numerous fintech products and solutions and will continue to do so in the future.
