ACH API: What it is + How to Use it [+ Who Should Not]

API. Three little letters that cause a lot of confusion. You know you want to get started sending and receiving ACH payments, but is an ACH API the right way to do it?

Today we’ll take a look at what an ACH API is, as well as why you would and when you shouldn’t use one. We’ll discuss ACH API providers for those who want to, as well as alternatives for those who decide not to use an API.

What is an ACH API? Why use an ACH API? Who should NOT use an ACH API? How to Get Started with an ACH API ACH API Providers Alternatives to an ACH API

What is an ACH API?

Before we get into the technical details, let’s take a quick refresher and make sure we’re on the same page.

• ACH is the Automated Clearing House; a computer network that allows banks to transfer money directly between accounts. It’s one of the safest and cheapest forms of electronic funds transfer (EFT).

• API is an Application Programming Interface. It’s a bit of code that lets software programs communicate with each other. Most importantly, it allows them to use each other’s data.

So an ACH API is a bit of code that connects your software to the ACH network. In action, it’s a way to allow your website, app, or finance software to make or accept ACH payments securely.

But it’s not the only way, so let’s explore why or why not to use an ACH API…

Why use an ACH API?

Let’s be clear: If you’re just looking for a quick way to accept ACH payments, you probably don’t need to mess around with an API. Nearly any major payment processor (think PayPal, Stripe, or HubSpot Payments ) can handle ACH.

You sign up for an account, add their payment gateway to your site, and you’re (literally) in business.

So why would you use an ACH API?

• You don’t want to display a payment processor’s checkout portal. When your business reaches a certain size, your customers expect a professional checkout experience. Having another businesses’ branding on your payment portal can limit your credibility.
  
  A custom-coded payment gateway allows you to keep your own branding on your payment experience.
• You want to automate recurring or bulk payment processes. Manually processing transactions can become a huge time suck as your business scales. Imagine having to initiate a few hundred ACH debits every month when your invoices come due.
  
  An API can be designed to automate both debits and credits.

You want to connect your payment data with your accounting tools, CRM, or other business software. Automating the transfer of payment data can reduce the need for manual data entry. This tends to make APIs very popular with sales and finance departments.

Who should NOT use an ACH API?

While any business would be interested in the benefits listed above, an ACH API is not the right solution for every business. Here are some reasons why you might consider an alternative solution:

• You don’t have the developers to manage an API. Bank accounts change. Software gets upgraded. Code breaks. Do you have the know-how to update your API every time it needs attention? If not, you could find yourself unable to take or make payments.

• You don’t have the staff to comply with ACH rules and regulations. For the security of your business and your customers, there are rules about handling payment data, initiating transactions, and even handling transaction failures.
  
  Most of the time these concerns are handled by your payment processor, but if you add a custom API into the mix you may shoulder some of that burden.

You have a large international customer base. The ACH network only operates within the U.S. and U.S. territories. So if you need to accept international payments, you’ll want to explore an option that allows for global EFT as well.

How to Get Started With an ACH API

If that last section didn’t scare you off, you’ve got a few options for choosing an ACH API.

Talk to Your Bank

If you already have a merchant account to accept credit card or ACH payments, your bank may provide its own ACH API.

The upshot to this route is that there are likely to be no monthly costs beyond your normal transaction fees. The downside is that these proprietary APIs tend to be limited in functionality, and your dev team may be on their own in building an integration.

Some banks may also partner with a third-party payment processor to offer an API.

Find a Third-Party Payment Processor

The simplest way to get started is to work with a third-party payment processor. The benefit of this path is that these providers will often work with you to help ensure ACH rule compliance, security, and functionality.

The tradeoff is that they’ll often charge transaction fees on top of your normal ACH fees. That said, even with these additional fees, ACH remains one of the most inexpensive payment methods.

1. Stripe Payment API

Stripe is the well-known payment processor behind hundreds of thousands of internet businesses. Its API gives you access to it’s full platform of payment services.

• API Cost: $0.10 - $1.50 per API call for various services

• ACH transaction fees: 0.8% of the transaction amount

2. PayPal ACH API

PayPal is quite possibly the most popular payment provider in the world. Its APIs let you build payment solutions online, for mobile, or even for your in-person systems.

• API Cost: $0.25 per transaction for payouts

• ACH transaction fees: 3.49% + $0.49 per transaction

3. Dwolla API

Dwolla is an account-to-account payment provider that specializes in API integration. Their platform offers features for small businesses all the way to enterprise.

• API Cost: Starts at $250/mo.

• ACH transaction fees: 0.5% per transaction

4. Square ACH API

Most people know Square for its popular mobile card reader, but its API will let you accept a wide variety of payment types.

API Cost: Free ACH transaction fees: 2.9% + $0.30 per transaction

Alternatives to an ACH API

If you’ve decided that coding an API is not for you, you’re not out of the game yet. It’s possible to get the same benefits of an ACH API using off-the-shelf tools.

For example, HubSpot users with a starter account or above can integrate HubSpot Payments with their CRM and CMS. This allows you to:

• Create a custom payment form for a branded checkout experience.
• Use automated workflows to instantly update debits and credits in your accounting software (including QuickBooks).
• Automatically add payment history to your customer records, so your sales and service teams always have up-to-date information.
• Enable recurring payments without manual entry.

This also applies to credit and debit card payments, as well as ACH.

Get Paid (or Get Paying)

Take the time to think about the benefits and challenges of using an ACH API, and how they apply to your business. Discuss these pros and cons with your developers, as well as with the sales and finance teams the decision might impact.

Whether you decide to use an API or a CRM-based solution, there’s an ACH option that’s right for you.