Shopmonkey Payments: Accepting ACH Payments

What is ACH?

ACH (Automated Clearing House) is an electronic payment network used in the United States for processing transactions between financial institutions. It allows for secure, efficient movement of funds between bank accounts, and is used for a wide variety of transactions, such as direct deposits, bill payments, and business-to-business payments.

The purpose of ACH is to facilitate electronic transfers, replacing paper-based methods like checks. Its purpose is to reduce the inefficiency of manual check processing and provide a secure method for processing large volumes of transactions.

Please Note: ACH payments are only available to shops that are located in the United States.

Enable ACH in Your Shop

To enable ACH, your shop must have Shopmonkey Payments enabled and be located in the US. ACH can be toggled on and off in your general settings.

Select the Settings icon in the bottom left corner of your screen.

Select Payments under the Settings section on the left-hand side.

Toggle on ACH.

Processing Payments with ACH

The ACH process is broken into several steps to ensure that funds are transferred securely and efficiently. These steps typically take between 4-6 business days, depending on the financial institutions involved.

Authorization: The customer provides permission for their bank account to be debited (or credited) through an ACH transaction
Clearing: The payment request is sent through the ACH network, which routes the transaction between the customer’s bank and the business's bank
Settlement: Once the transaction clears, the funds are either debited or credited to the respective accounts. Settlement finalizes the transaction

Select ACH as the payment method when accepting payment in your shop. If a customer is paying online, they have the option to select ACH when it is enabled in your shop.

Transaction Fees & Limits

Transaction Fee: Shopmonkey applies a cost of 80 basis points (0.80%) per ACH transaction
Minimum Transaction Fee: There is a $5 minimum transaction fee, which applies regardless of transaction amount
Refunds: Refunds must be processed within 180 days of the transaction
Failure Fees: The fee for a failed or returned transaction is a fixed $4
Disputes: Most ACH transactions are disputed within 60 days of the transaction

Transaction Failures

ACH Direct Debit transactions can fail after the payment is initiated through payment confirmation. These failures can occur for a number of reasons, such as:

Insufficient funds
Invalid account number
Customer disabling debits from their bank account

If a payment fails after funds have been made available in your Stripe balance, Stripe immediately removes funds from your Stripe account. In rare situations, Stripe might receive an ACH failure from the bank after a Payment Intent has transitioned to succeeded. In this case, Stripe will reverse the payment with one of the following reasons:

Insufficient funds
Incorrect account details
Bank cannot process

Stripe charges a failure fee of $4.

Check out our help article Shopmonkey Payments: ACH FAQs to learn more.

Best Practices for ACH Direct Debit Transactions

ACH Direct Debit Dispute Process

Customers can typically dispute a payment with their bank up to 60 calendar days after a debit is made on a personal account, or up to 2 days for a business account. In rare instances, a payment may be successfully disputed outside of these timelines under a process known as a "late return." This process is managed at the discretion of the banks involved.

When a dispute is initiated, funds are automatically removed, and the case will be considered lost and closed, including the associated dispute fee.

Unlike credit card disputes, ACH direct debit disputes are final, and there is no appeal process. If a customer successfully disputes a payment, you must directly contact your customer to resolve the issue and recover the funds.

Once an ACH direct payment is disputed, the original bank account cannot be reused/recharged. If you and your customer reach an agreement to resolve the dispute, you must obtain an alternative payment method or bank account, as the original account cannot be charged again.

Refunds

The maximum time frame for processing a refund is 180 days from the date of the original payment. Refunds typically require at least (3) business days to be fully processed. A refund request should only be submitted once the original payment has been successfully completed.

When a refund is issued, the account holder will see it reflected as a credit on their account.

ACH Return vs. ACH Dispute

An ACH return occurs when there is an error with the account number or an issue with the account being debited (e.g., invalid account or insufficient funds).

An ACH dispute, on the other hand, arises when the customer claims the transaction was unauthorized.

What is an ACH Direct Debit?

ACH, which stands for Automated Clearing House, is an electronic payment method used to transfer funds between bank accounts. This process utilizes the ACH Network, a secure network that facilitates the movement of money from one bank account to another.

The ACH Network connects thousands of financial institutions and is regulated by Nacha. All payments processed through the ACH Network must adhere to Nacha's guidelines and rules.

What is Nacha?

Founded in 1974, Nacha (National Automated Clearing House Association) develops the rules and standards governing the ACH Network. While not a government agency, Nacha collaborates with governmental bodies, including the Federal Reserve, to maintain the integrity of electronic payments.

Nacha’s operating rules define the roles and responsibilities of all parties involved in the ACH Network, including customers, businesses, banks, and financial institutions. These rules are updated and amended at least annually, making it crucial for stakeholders to stay informed of any changes. For more information, you can access the Nacha operating rules via their website at www.nacha.org.

Nacha Compliance Rules

Overall Debit Returns: Debit returns should not exceed 15%, applicable to all debit entries returned for any reason
Administrative Returns: Administrative returns should not exceed 3%, applying to debit entries returned due to administrative or account errors
Unauthorized Debit Returns: Unauthorized debit returns should not exceed 5%, covering debit entries returned as unauthorized

Transaction Failure Types / Dispute Reasons

Insufficient Funds: Insufficient funds available in the account
Payment Stopped: Payment has been stopped by the bank
Invalid Account Number: Incorrect account details provided
Customer Disabled Debits: Customer has disabled debits from their bank account, preventing processing

Administrative Returns

Account Closed: The account has been closed
Unable to Locate Account: The account could not be found
Invalid Account Number Structure: The account number provided does not meet the required format

Unauthorized Returns

Unauthorized Debit: The debit was not authorized by the account holder
Authorization Revoked: The customer has revoked their authorization for the debit

Additional Best Practices

Funds Acknowledgment and Payout Timeline: It may take 4 - 6 days to receive acknowledgment of a successful or failed ACH transaction
Payment Risk: ACH direct debit is not a guaranteed payment method, and there is a risk of failed payments or disputes
Service and Product Delivery: It is advisable not to render services or deliver products until the ACH direct debit has cleared and the funds have been successfully deposited into your bank account
Accepting ACH Payments from Established Clients: It is best to accept ACH direct debits only from known, established clients with a reliable payment history
Monitor Large Purchases from New Clients: Be cautious if a new client intends to make bulk purchases of high-value, resellable items (e.g., tires, parts, speakers, etc.)
Customer Verification: Ensure thorough vetting of new clients before proceeding with transactions. If you are not confident in your research, it is best to refrain from moving forward
Identification Check: Request to review the customer's driver’s license or state-issued ID to verify their identity
Risk Management: If a transaction is flagged for risk, we will reach out for additional information or documentation. Note that if the transaction is disputed, it is considered an irreversible dispute
Authorization and Record Keeping: Obtain proper authorization from customers before debiting their bank accounts. Retain the authorization on file for at least (2) years and be prepared to provide copies upon request

Identifying Potential Fraudulent Activities and Scams (S.P.O.T.)

Suspicious or Unusual Requests from New Customers

Requests to make bulk purchases
Places consecutive orders, often within a short time frame (e.g., within a week)
Purchases items with high resale value (e.g., tires, rims, or kits)
Requests expedited or overnight shipping
Communication is limited to phone, email, or text only
Requests you to wire funds to an external account
Requests for refunds to be issued to a different payment method

Pushy or Persistent Behavior:

Displays a hurried tone or body language
Applies undue pressure to finalize the order
Becomes unreasonable or defensive when questioned about the order
Threatens to take business elsewhere if demands are not met

Unusual or Unexpected Orders:

Is this type of order out of the ordinary for your business?
Does the order seem surprising or unexpected?

Too Good to Be True:

Take a moment to pause and consider: “Does this order seem too good to be true?”
- If the answer is “yes,” it could be a sign of fraud or a scam

Still have questions? Feel free to reach out to us through the chat icon. Thanks for reading!

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