Chime and Plaid Leverage ACH Payment Methods to Help Businesses Streamline Operations
Digital bank Carillon Note that if you’ve ever tried to schedule automatic bill payment from your bank account or received a direct deposit, you might understand how convenient these transactions can be. We may be able to avoid many late fees if we settle transactions this way.
Carillon explains that these transactions are processed through the ACH network, which offers an electronic payment method.
Chime notes that an ACH transfer is an electronic or digital movement of money from one bank account to another. In an ACH payment, you have one person or entity that sends a payment and another that receives it. This payment is handled through the Automated Clearing House (ACH) network, Chime explained.
When processing these types of payments, certain details are required, such as where the funds are coming from and where they are going.
As stated by Chime, the following information is required:
- Bank account number and routing information for the person or company sending the payment
- Bank account number and routing information for the person or company that will receive the payment
- Account name and bank name
- Amount to send
Chime’s blog points out that if any of the above-mentioned information is not provided, an ACH transaction cannot be completed.
Chime also mentions that an ACH transfer can be made by debit and credit. The digital bank further notes that an ACH debit transaction involves the withdrawal of funds from a bank account. An ACH credit transaction takes place when funds are deposited into a bank account.
In these types of transactions, you have the person or business sending the money. You also have the person or company that receives the funds. The sender’s and receiver’s banks are also involved, and the ACH operator who handles electronic debits and credits also guarantees the transaction’s success, the Chime blog post added.
Chime also mentioned that if you initiate an ACH payment, the direction in which the funds are moved determines whether it is a debit or a credit. Here are some examples of ACH credit and debit transactions:
- Payments by direct deposit from the employer
- Direct deposit payments for tax refunds or stimulus checks
- Payments by direct deposit of government benefits
- Payments received by businesses for goods or services
- Scheduled automated bill payments from a checking account
- Money transfers between accounts you have at different banks
- Electronic payments to businesses for goods or services
Chime’s blog post further explained that ACH payments can sometimes be referred to as “push” or “pull” transactions (depending on how funds are moved).
Personal finance specialist Lake Rebecca, the author of the blog post, writing:
“[ACH] works backwards when you receive a payment. So, if you set up direct deposit with your employer, you will receive an ACH credit or push transaction once the money arrives in your account. Your employer would withdraw the money from their bank account to pay you, which would result in an ACH debit.
“In general, ACH payments are convenient and easy to process. (It’s much easier to schedule an ACH payment than it is to write a paper check!) And, because they’re electronic with a digital paper trail, they’re also easy to follow.
FinTech Plaid reveals that in 2019, there were approximately 23 billion ACH transactions transferring over $ 51 trillion. Same-day ACH transactions “more than doubled in 2018 and the value of those payments increased 83% last year.”
Plaid pointed out that ACH’s expansion has “outpaced economic and population growth.” However, most consumers don’t actually realize they’re running the network, or even what it is, notes Plaid.
Plaid adds that ACH powers things like direct deposit paychecks, recurring bill payments, and peer-to-peer exchanges, including PayPal and Venmo.
Plaid helps users get on board for ACH payment by “eliminating micro-deposits, which can shorten your onboarding process by days.” Many ACH processors charge a flat fee per transaction instead of a “percentage charge” often charged by payment card networks, Plaid noted.
Plaid also revealed that 72% of employees say that “getting paid by ACH deposit helps them take control of their finances.”
Meanwhile, the Chime blog post notes that “most likely, you’re using ACH payments a lot more than you think.” The blog adds that an easy way to start enjoying the benefits of ACH payments is to set up direct deposit for your paycheck, tax refund, or even stimulus checks.
You can go ahead and sign up for direct deposit with Chime and potentially get paid up to two days in advance.
Notably, Chime has had discussions with various banks regarding its plans to go public, which could value the company at over $ 30 billion. It could happen by the end of this year, according to to Reuters who cited sources familiar with the matter.
Chime management says their average customers spent 33% more in 2020 through the digital banking platform than in 2019.
CEO of Chime Chris Britt says people “don’t really want to touch ATMs anymore.” He added that people “don’t want to handle cash as much as they used to” and that they “feel more and more comfortable paying for things through apps, managing their accounts through apps. “.
Chime has also been successful in gaining customers by providing American consumers with quick access to their stimulus checks. Britt says it’s part of an “obsession” with supporting customers in these unprecedented times.