Electronic transfers can expedite payments and relieve you from handling and manually tracking cheques, or incurring fees when paying by credit card. Unfortunately, only transactions like payroll, tax refunds, interest payments, and annuities can be sent through direct deposit.
This is where ACH transfers come into play. ACH transfers are batch electronic transfers that allow more flexibility and processing on the bank’s end, and a clear record of transactions for both the receiver and payee.
ACH transactions can operate as an ACH debit and as an ACH credit. While ACH transactions are usually processed by the bank, there is additional software that can bypass this network and allow small businesses to interact through bank-to-bank transactions.
Incorporating an ACH API into your company and/or software can minimize ACH transaction fees, and it can also speed up transaction processing times.
What is an ACH transfer?
In order to understand why this form of payment processing may be beneficial for you, let’s first break down what ACH means.
ACH stands for the Automated Clearing House. In the United States, all electronic funds transfers and direct deposits move through the Automated Clearing House (ACH) Network (NACHA), which is the USD national clearinghouse for all electronic funds transfers. This payment method is sold to businesses and government customers by the US Treasury, but you will typically use this service through your bank. Notice that electronic funds transfers are limited by the currency and are usually controlled on a national level.
In simple terms, ACH is an electronic bank-to-bank transaction that is similar to how a direct deposit operates. ACH transfers are processed as either an ACH debit or an ACH credit. All ACH transactions are sent in batch forms and it may take a few days (24-72 hours) for the payment to go through. That’s why you typically want to use ACH payments with a company or consumer that you know, or one who is more likely a recurring spender.
What is an API
An API stands for Application Programming Interface. Really, an API is nothing more than a packet of information (in the form of web code) that will send a specific request to a specific server. This means that when you use an API, you don’t need to navigate the code or fill in any transactional data. The API has a format prepared for the receiver and is already prepared to send it.
Whenever you navigate to a website, you are requesting information from the remote server that the website is housed on. Each remote server will have APIs for receiving and sending information. In this interaction, APIs refer to the part of that remote server that receives requests and sends responses. So if you type in silamoney.com, you are sending a request to Sila’s remote server API to retrieve our website data and to display it appropriately for you on your computer.
APIs can be created and programmed for a specific task. One common example of an API is if you have a calendar of events that you want to be integrated into Google Calendar. An API can be created that translates your events into the format that can be read by Google Calendar. If you want that data to be embedded on your calendar, then the API will translate that information for you.
Why an ACH API?
While this may sound like a lot of technical jargon, recognize that you interact with both APIs and ACHs every day.
When programmers create an API for ACH transfers, that just means they are creating a specifically formatted request to be sent to the ACH network.
Alternatively, ACH APIs can be sold to the Software as a Service (SaaS) model and can be integrated with your banking. ACH APIs can be robust, and like Sila’s API, they can change the way that bank transfers work and can open up any bank account to transfer money to brokerage accounts, shared accounts, alternative currencies or blockchain.
Benefits of using an API to take ACH payments
There are several benefits of having an API for ACH payments. Many businesses prefer ACH payments over credit cards because of the cost savings. On average, credit cards or mass payment services may charge 2-5% of the cost of the transaction. ACH transfers processed by smaller companies collect fewer fees. Smaller ACH transfer APIs can usually charge 25 to 50 cents per transaction.
According to Nacha’s operating rules, financial institutions that use direct send through ACH Operators at Nacha are required to report transactional data. Based on the volume of transfers they are also required to pay the ACH Network through a per-entry proportional Network Administration Fee as well as an annual fee. As a business or consumer, this can add up.
In addition to the cost savings, there is much more flexibility in terms of what money can be transferred and how a financial contract plays out. For example, smart contracts can be coded into ACH APIs that allow for a financial obligation to be kept.
APIs like Sila’s can also be used by virtually any programmer so that any company can incorporate their own ACH API. This way, all ACH transfers are protected under the Sila coin and sensitive data is white labeled to protect consumer identity.
ACH APIs can Improve Business Operations
If you are new to the world of ACH APIs, understand that there is a lot of malleability in what these APIs allow you to do. Whether you are a programmer and interested in developing ACH APIs or you are a business owner and interested in incorporating them in day to day transactions, ACH APIs can drastically change how your business operates and open doors for bigger international transactions and a different type of market option.
Here are SilaMoney, we know this and we are continually working to provide accessible API that developers can create from and implement in software.
Since we are bringing something new and exciting to this industry, we want to take the time to explore everything there is to know about ACH APIs, the options for business owners, and new avenues for API programming. Stay tuned!