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Automated Clearing House

Introduction

Automated Clearing House (ACH) is a form of electronic funds transfers similar to Direct Debit in Europe. Avangate supports online payments from shoppers and business customers in the United States who prefer to pay directly from their bank accounts.

Avangate can collect funds directly from your customers’ bank accounts for both in-cart payments, such as first time purchases or upgrades, and for recurring charges, such as subscription renewals.

Market overview

48% of US shoppers use credit cards for online shopping, 30% use debit cards and 12% pay via PayPal. Consumers and businesses also use ACH payments or checks, for bills, payroll and other large transactions.

Consumers and businesses spend more when they use credit cards over any other payment method.

Source: Avangate data

Flow diagram

ACH workflow

  1. Shoppers fill in their billing details and select ACH as their payment method.
  2. They fill in their bank details and select the type of account to use for fund transfer.
  3. Shoppers place the order.
  4. Avangate redirects them to the Thank You page.
  5. Avangate marks the transaction as pending.
  6. Avangate receives the payment confirmation (or decline) message from the bank.
  7. The transaction switches to one of two statuses:
    1. Complete – when Avangate receives the payment confirmation message from the bank.
    2. Pending– when Avangate receives error messages from the bank. ACH transactions can fail from various reasons: incorrect account numbers, insufficient funds, incorrect bank account settings etc.

Fulfillment/Delivery

Not being an instant payment method, ACH payment processing may take up to 5 business days. Order delivery takes place after payment confirmation. Shoppers can see the payment on their bank statement soon after being charged. They can see if payment succeeded before the bank notifies Avangate.

Notifications

Following the payment, shoppers receive a series of Avangate emails.

  • Order confirmation. Email informing the shoppers that the payment is about to be processed (may take up to 5 business days).
  • Payment receipt
  • Electronic delivery
  • Abandoned cart. Email informing shoppers about recovering unfinished transactions using other payment methods such as Visa/MasterCard or PayPal.

Descriptors

Descriptors are strings of 10 characters used by Avangate to reflect the merchant name set in the Control Panel. If you haven’t set a descriptor in the Control Panel, bank statements will show the short URL. Statements include the descriptor along with the order status:

  • PENDING orders display the AVANGATE INC descriptor.
  • COMPLETE orders display the AVANGATE INC [Merchant_Name] descriptor. [Merchant_Name] is limited to 10 characters.

Chargebacks

The largest benefit of providing ACH support is lowering the risk of dealing with fraudulent consumers, consequently lowering chargeback rates.

According to ACH regulations, shoppers are allowed to dispute ACH charges in three specific scenarios:

  1. The account holder never authorized the transaction.
  2. The charge was processed earlier than the account holder had authorized it.
  3. The account holder authorized the transaction for a different amount.

Limitations

ACH transactions are only supported by US bank accounts and can only be made using USD.

Shoppers can see the ACH charge on their account statements a couple of days after the charge is made.

FAQ

  1. Does ACH support recurring billing?
    • ACH supports recurring billing for automatic subscription renewals.
  2. Does ACH support refunds?
    • Yes. You can request a refund from the Avangate Control Panel. Shoppers can also contact Avangate directly to request a refund.