If you’re new to the ACH Network, it might seem complicated or daunting to figure out how it all works. However, once you get to know its processes, it is actually quite simple to understand.
The biggest complaint that we hear here at Sila is the lack of functionality in the ACH Network. This means that more and more people feel restricted by what the ACH Network has to offer. As consumers within the U.S. financial system, we want to move money and we want to do with it a lot of flexibility and the ease that is available in the global financial system. However, and unfortunately, the ACH Network does not necessarily allow for that.
We decided to get creative when it comes to the ACH Network. After all, we are a part of the financial system here in the States and we want our money to go far. We’ve tested and implemented several technologies including an ACH API, authorization services, digital wallet services, and cryptocurrency (to names a few) in order to expand our U.S. customers’ capabilities.
If you’re not sure what this means, no sweat. We are here to help and to educate you on what your business can do, whether you are seeking to build B2B interactions as a fintech startup or you’re looking to make the next fintech breakthrough.
How the ACH network works
So what’s all the fuss about? ACH is a term that is thrown around in the fintech and banking industry. ACH simply stands for Automated Clearing House and it refers to an automated electronic payment processing system in the United States.
Most countries have a form of the ACH and often this money transfer system will be specific to the nation in which it works.
And the process for the ACH is straightforward:
- A person (known as the Originator) makes a request for an electronic money transfer. This is usually done with their financial institution (such as a bank or credit union) but it can also be done with a third-party payment processor (TPPP)
- The Originator will usually be approved with the financial institution under Know Your Customer (KYC) regulations. They will also be set up through authorization methods in order to ensure that the transaction isn’t fraudulent
- Once this request is made, that financial institution will send it over to the receiving institution but it must go through the ACH Network first. This means that it gets sent to the Clearing House and eventually the Federal Reserve which goes through a system of automated checks to ensure that the Originator is who they say they are, that the money can indeed move from one bank to another and that the Receiver is also verified.
- Once this process is completed, the transaction can be finished and money is sent. Depending on the transaction type chosen, the process may take 48 hours to 4 business days or it may take one business day.
- If something fishy pops up, a return code is sent to the financial institution that is set to receive the funds (on behalf of the receiver). That financial institution, known as the Receiving Depository Financial Institution, then reports to the financial institution that initiated the transaction (on behalf of the Originator, known as the Originating Depository Financial Institution), and then it is up to the Originator to sort things out.
- If no return codes pop up, the process is completed. Common uses of the ACH payment process is a direct deposit (for a paycheck), depositing money into an IRA account, or setting up recurring payments for bill pay.
When operating through the ACH Network, the National Automated Clearing House Network (NACHA) requires that each ACH operator is approved for ACH payment processing.
So while all of this is relatively straightforward, there are limitations around what can and cannot go through the ACH Network. For example, if you want to pay a bill through the network, the bill payment recipient has to be cleared through the bank, if you’re using a bank account.
This is one of the reasons why a TPPP, like a digital wallet or payment gateway, has high value, as these services improve the functionality that can exist in economic transfers and allow more people to pay bills seamlessly.
How Sila can facilitate ACH transfers and other transactions
If you’d like to send an ACH transfer but are restricted through a typical bank or credit union, a transfer can be initiated through an ACH API or digital wallet. You can also create a digital wallet in order to set up your own system of financial transactions completely secure and completely verified.
Sila can help facilitate this. How?
Well, here at Sila we have collected some of the smartest engineers and developers to create a set of software development kits (SDKs) that allow other developers and companies to build their own payment platform.
Based on our system of services and with our SDKs, business owners and software teams can create a ready-to-go and fully compliance payment processor to securely send and facilitate an ACH transaction.
To do this, we use a powerful network of Software as a Service (SaaS) models so that authorization, authentication, bank account linking, and cryptocurrency is essentially outsourced, but can be easily integrated into the app that your company creates.
How Sila’s API can be used for ACH transactions
The Sila API is a ready-made SDK that provides clients with the ability to build a web, mobile, or desktop payment processor that is compliant, customizable, and white-labeled.
The API endpoints can also perform identity verification and bank account linking and in that way, allow clients access to traditional payment rails.
With the embedded financial services in Sila’s API, the following functions can be performed:
- ACH payment and processing
- Bank account linking (which includes bank account number, balance check, and name matching)
- Digital wallets
- Identity verification of individuals and businesses
- And access to additional features
ACH Payment and Processing
ACH payment processing is powered by Alloy’s identity verification and Plaid’s account verification and bank account linking. Through these two endpoints, Sila can provide fraud prevention and registration.
For ACH payment and processing, the API provides ACH debit to a digital wallet, ACH credit to bank account, bank account to bank account, and same-day ACH (coming soon).
Bank Account Linking
Through two simple endpoints, Sila uses the power of Alloy’s identity verification with Plaid’s account identification and bank account linking to provide fraud reduction and new account conversion.
The API performs the following functions:
Bank Account Balance Check
With Plaid Balance, Sila can verify balances in real-time and reduce non-sufficient funds (NSFs). The API verifies the bank account’s available balance and current balance.
Bank Account Name Matching
Sila takes advantage of Plaid Auth to securely do the following:
- Authenticate accounts that exist in any of the 11,500+ financial institutions in the U.S
- Instantly connect accounts after users input their bank account credentials
- Maximize conversions with multiple ways to authenticate accounts
Bank account name matching is available for both personal and business accounts for a faster and simpler user-friendly experience.
Digital Wallets
Sila also offers a digital wallet solution that enables end-users to fund a mobile wallet in seconds with decimal-point accuracy. While the API supports payments and transactions between bank accounts and digital wallets, it also offers a Cryptocurrency Wallet API that supports ERC-20 and Solidity smart contracts or the use of the secure Sila token.
Sila’s Digital Wallet API is an intuitive end-to-end solution that can support cryptocurrency exchange wallets, KYC and authorization on-ramps for businesses looking to leverage blockchain technology.
Identity Verification of Individuals
Sila uses Plaid Identity to verify and authenticate users’ identities, reducing fraud. User details such as the account holder’s first name, last name, physical mailing address, phone number and email address can all be verified through Plaid.
Identity Verification of Businesses
Alloy is integrated into the Sila API KYC identity verification and a proprietary scoring model. Sila + Alloy provides access to over 30 identity data providers and identifies:
- Address Authentication
- Business Identity Data (i.e., business banking information and merchant account information)
- Email Address
- Fraud Scores
- Identity Document Verification
- Knowledge-Based Authentication
- Multi-Factor Authentication
- Phone Data
- Public & Private Records
- Watchlist Screening
Additional Features
Sila’s partner network provides access to additional features including:
- Apple Pay and Google Wallet
- Branded Stablecoins
- ACH Billing
- Card Acquiring
- Corporate Bank Accounts
- Fiat-Crypto On-ramps
- International Payments
- No-KYC Merchant Payments
- White-label Statement Descriptors
- Physical Card Issuance
- Push to Card
- Real-time Payments
- Securities Trading and Transaction Data
- Virtual Bank Accounts
- Virtual Card Insurance
- Wire transfer
Sila’s support for updating the ACH network infrastructure
With these high-powered fintech integrations to confirm things like identity verification and bank account linking, Sila’s API is allowing businesses and other B2B relationships to be more fluid in their interactions with financial innovation and the ACH Network.
This programmable API offers increased security and flexibility when it comes to sending programmable money. The API is secure under consumer data protection and there is no middleman who has to process the payment, ensuring that the transaction is 100% secure and encrypted.
By eliminating the middleman, Sila allows businesses to move away from costly wire transfers or credit card transaction fees and minimize the amount of fraud in financial networks.
With extremely fast services and intelligently linked partnerships, the Sila API provides support to the existing ACH network infrastructure and room to grow for new fintech innovation.