What is a Domestic ACH?

Payment Method Guide

Domestic ACH (automated clearinghouse) transfers, also known as “direct deposit” or “electronic funds transfer (EFT),” are a convenient, reliable, inexpensive payment method. It requires knowledge of the payee’s bank account and ABA routing transit number (ABA RTN) – customarily available as the first set of digits on the bottom of paper checks and deposit slips. The second set of digits on the check is the account number.

In the United States, the Automated Clearing House (ACH) provides a cross-bank transfer network to clear and settle payments. It does so in batches, which can require several days for payments to clear each bank.

To manually execute a high volume of mass ACH payments, batched instructions may be able to be sent to the transmitting bank. This can involve a programmatic interface directly with the bank or a file upload with all account information, and an understanding of the bank’s communication protocols. In case of error, a series of return codes are sent by the ACH network to identify the issue.

• “automated clearing house”

• “Mass ACH”

• “ACH API”

• “direct deposit”

• “EFT”

• “electronic funds transfer”

• Inexpensive

• Convenient

• Cannot be used to pay overseas

• Requires at least a day to clear funds

• Manual interface with bank

• Not designed for paying mass volumes of payees

• Generally poor access to bank transfer APIs

Requires bank account and ABA routing information.

Best Use Case for Domestic ACH

Domestic ACH transfer are best used with a payee in the US who doesn’t require immediate access to funds, as clearing can take several days. It is also ideal for US-based payees that are cost conscious or for payment amounts that tend to be lower or more frequent.

Worst Use Case for Domestic ACH

Domestic ACH should be avoided when the payee or beneficiary requires funds immediately or if they do not have a bank account that offers direct deposit. Additionally, domestic ACH is not available for anyone outside of the US.

How Tipalti Works with Domestic ACH

When US-based payees select domestic ACH as their chosen method of payment, Tipalti prompts payees to enter their bank account number and ABA routing code. Tipalti checks form fields to ensure the entries have the correct character count, format, and structure. This reduces virtually all likelihood that payments will be rejected due to incorrect information. If the payee is not in the US, domestic ACH is automatically hidden as a payment option. Tipalti also allows the payee to choose certain payment thresholds so they can determine when an ACH transfer is cost effective. Payers can also determine how much or if any fees are passed to the payee.

To streamline bank communications, Tipalti allows you to make mass ACH payments at once through various payment method interfaces. The payer does not have to directly communicate with the bank(s) or access any banking portals for remittance. Funds are pushed into the payee’s designated bank account. Should issues arise (such as the wrong account information or a frozen account), Tipalti stops payment and interprets and normalizes ACH transfer errors into standard, easy-to-understand error messages on how to correct the issue. If the payee can correct the condition, they are automatically sent a branded email on behalf of the payer with information for remedying the situation. To prevent overdraft, only adequately funded accounts will enable a transaction.


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