What to look for in an ACH API

There is no doubt that APIs are propelling fintech. With API technology, small fintech companies have the power to provide previously unavailable services to a growing client and customer base. And, more and more, we are seeing companies use APIs to work together in order to provide a variety of options for today’s discerning consumer. 

Not only do APIs allow the consumer peace of mind when providing sensitive information, but they are also shifting the way that the B2C sales process works. Finance APIs have the power to process credit card payments while keeping transactions secure. They can also function as digital wallets, investing and lending clients, and automate billing and account authorization. 

Payment gateways and payment acceptance APIs have transformed how we do business.

Naturally, your company will want to capitalize on this “second coming” of intuitive financial technology. By integrating an API into your merchant software or in an online store, you are able to provide flexible payment options while ensuring that consumer accounts are secure. 

But, with so many options, how do you choose the right one?

If you are a company looking to expand your payment options, then you’ll want a payment gateway or payment processing API that accepts ACH transactions. Here is what to look for when considering which ACH API to integrate.


What Are Finance APIs Used For?

Finance APIs link together data from internal and external sources in order to streamline the operational processes involved with the exchange of money. We interact with finance APIs on a regular basis, even if we don’t know it. Most online transactions will operate through some type of finance API. 

Finance APIs provide the benefit of easy and secure access to internal data, fueling external fintech development, and encouraging more innovative internal product development.

One of the biggest use-cases for finance APIs is the ability to share internal data more easily. This largely speaks to sensitive account numbers, private social security numbers, and other Sensitive Personal Identifying Information (PII). APIs can also easily link together partner API integration so that more tasks can be outsourced while maintaining high-level security.

Fintech companies largely operate using finance APIs, but financial institutions like banks and credit unions also use these APIs in order to share data internally. Finance APIs can be classified as internal APIs (used internally to a company), private APIs (which might be used for sharing sensitive data with partner integrations), and open APIs (which will have less sensitive info but more developer access). 

There are largely seven different markets for a finance API: investing and lending, remittance, accounting, bitcoin, payment acceptance, authorization and verification, and payment gateways and processing. 

If you are a merchant, then you will most likely use APIs for payment acceptance and processing and for authorization and verification. However, you might also experience APIs that support your company’s accounting and lending.


How ACH APIs are Used

ACH APIs are APIs that facilitate ACH transactions. Automated Clearing House (ACH) transactions are bank-to-bank transactions that are made electronically, which means that they are approved through the ACH network. In America, the only network to approve ACH processing is NACHA—the National Automated Clearing House Association. 

Bank-to-bank transfers are typically things like direct deposit or bill pay, but ACH APIs are opening up bank-to-bank transfers for individuals as well. Since APIs tokenize account information, then verifying who the account holder is and their private data is way more secure. Additionally, partner integrations open up small fintech companies to providing more value to their services.

For a merchant account, ACH APIs are designed to connect to a consumer checking account or company checking account and then send an ACH debit request through the ACH network. This means that the API will need to:

  • verify the account holder name, 
  • verify the bank account information (such as bank account number and routing number), 
  • be authorized to access certain banking information from the consumer, 
  • send the ACH entry form to NACHA for ACH processing, and 
  • be prepared to verify sufficient funds, direct debit the money from the bank account, or issue another request for insufficient funds, to issue a refund, or to set up recurring electronic payments. 

This is a lot of robustness in one little bit of code. This is why it is important to first ensure data security. Data security can be done through tokenization, or by anonymizing payment through cryptocurrency transfers. It can also be done by hiding access keys.


Features You’ll Want in an ACH API

When adopting an ACH API as a form of payment method, there are several things to consider first. What is largely at risk is sensitive data. However, the use of partner API integrations can limit this risk.

The ACH API that your company decides on needs to provide security assurances such as tokenization or secret access keys. In addition to this, you’ll want an established contract for any data that is stored and is not kept private. 

In addition to security, other features include the use of a digital wallet. A digital wallet is like a digital bank account, and it can act in one of two ways:

  1. Provide access to online debit cards, credit cards, and bank accounts to access whenever a payment is needed, or
  2. Link together debit cards, credit cards, and an escrow account. Therefore, when a payment is needed from a bank account, funds must first be deposited into the escrow account.

Since ACH transfers are bank account to bank account, you’ll need to consider whether you want the money to first be transferred into an escrow account in the digital wallet, or if the API is secure enough to directly access the bank account.

Other features that you’ll want to look for in an ACH API are data syncing across platforms, a live feed from source to app, and an open interface. Since APIs in fintech actually encourages the development of new fintech solutions, the ACH API you choose should be looking toward future fintech product development

You should also look for the option of recurring payments (debits) in your SaaS, easy integration (for app, web, web app, and SaaS), clear developer or back-end documentation, and low ACH processing fees.


What to Be Aware of Before Starting an ACH API Integration

Before you decide on an ACH API integration, you’ll want to make sure that the ACH API is fully vetted, with a team of developers and finance experts prepared to help. The API should also have gone through vigorous A/B testing, beta testing, and grant you access to the API sandbox

Access to the sandbox is important as it allows your developers the opportunity to customize the API for your company’s software and brand while working out any bugs between the integration source and the API’s source code. This is vital because it allows developers to test out how a user will go through the transaction. If something were to go wrong, you’ll want to find this out in testing rather than after the API is live.

Since ACH APIs are accessing bank account information, you’ll need to have your security plan decided beforehand. Will sensitive data be accessed and stored by your ACH API? If so, on what servers? Or, will it be authorized through a third party? Is that information also tokenized or hidden somehow? 

You’ll also want to keep in mind how long the transaction might take to complete so that you know when that money will be deposited into your account. And does the API force charge your company any transaction fees? If so, is there a way to lower these fees? If not, you’ll need to determine how you’ll be paying for them.

Integrating an ACH API into your payment system allows consumers to work around credit cards, and it also shows that your consumers want to automate their transactions with your company—which is a great thing! For integration to be successful, make sure that their private information is secure and that the user interface is easy to navigate.


Determining the ACH API That is Right For Your Business Needs

By allowing ACH transactions, you’re telling your consumers that you have thought through the merchant process and you want to offer them more payment flexibility. For example, certain ACH APIs allow users to transfer money into cryptocurrency as a way to fuel international money transfers. By allowing the option of cryptocurrency (and international money), you are giving more consumers direct access to U.S. markets—and your company.

Finding the right ACH API for your business requires industry know-how, extensive testing, and patience. You want to offer more to your consumers, but you can’t compromise security while you’re at it. 

When implementing an ACH API, you also don’t want to compromise the service that you have continued to offer to your consumers. Make sure that the ACH API can still process a debit card and credit card, especially if that is what you have used in the past.

If you are looking to integrate an API as a way to accept ACH payments, you’ll want to look to APIs that offer robust problem-solving solutions, including the ability to accept numerous types of payments, secure account authorization, and payment gateways. Of course, all of this will depend on the specific needs of your company.