As the most popular way to send and receive money between banks, ACH payments are a cost-effective alternative to other payment options like credit card transactions or electronic wire transfer. Accepting ACH payments requires a processing system that is capable of connecting to an Originating Depository Financial Institution (ODFI), provide payment status updates, an interface to authenticate users, and charge users at request.
Stripe is a financial services company and online payment processing system that does just that. Users who sign up to use Stripe and agree to their terms of service can start accepting ACH payments immediately.
Envestnet | Yodlee and Stripe work together to empower Stripe users with an intuitive online payment processing system with near instant user authentication capabilities. In this blog, we’ll explore the ins and outs of Stripe ACH payments, and how Envestnet | Yodlee helps Stripe users on their journey to financial wellness.
To learn more about the basics of ACH, read Envestnet | Yodlee’s “What Does ACH Stand For?” blog.
How Much Are Stripe’s ACH Fees?
Part of the reason why ACH payments are so popular is because they’re typically free of any processing fees that otherwise quickly start to add up for people who need to make large, recurring payments. A business owner could save hundreds on processing fees from other payment methods by enabling their business to accept ACH payments.
Any fees that are charged for an ACH transaction depend on who you bank with, but never exceed more than a few cents or dollars. How much money you move in a single transaction can lead to higher ACH fees, but still doesn’t compare to credit card or EFT fees that can be upwards of $30, per transaction.
As a payment processor, Stripe charges users minimal transaction fees of 0.08% of the amount of the transaction, capping out at $5 no matter how large your transaction amount is. So while some fees do apply, signing up for Stripe still offers its users a cheaper way to send and receive payments.
Stages of Stripe ACH Payments
In every ACH transfer, a payment is initiated by an ODFI who either pushes funds to credit another account at a receiving depository financial institution (RDFI), or pulls funds to debit another account. Regardless of ACH payment type, this remains the same with ACH payments made on Stripe.
The stages of sending ACH payments on Stripe are much more complex than the user experience, where sending a payment can take just a few clicks.
1. A User Initiates and Authorizes a Transaction
When someone selects an item for purchase online, they initiate the ACH transaction, so their bank is the ODFI. All that’s needed to authorize payment are some details from the customer’s bank account such as their account number and routing number.
2. Envestnet | Yodlee Authenticates the User and Creates a Token
When a Stripe user connects their account with Envestnet | Yodlee, we’re able to authenticate users in a transaction by ensuring their banking information is accurate and correct. Once account verification is complete, Envestnet | Yodlee creates a token, or secret key, that identifies and labels the unique user to their transaction. Stripe is then able to identify what account needs to schedule the ACH credit transfer from.
3. Stripe Receives the Payment
After a customer’s banking information is authenticated, the Stripe account can receive payment from the RDFI. However, ACH payments use a batch processing system that stores and sends out batches of payments at certain times throughout the day. This helps move more money at once, but also slows down how long ACH payments take to fully process and settle.
While typical ACH transfers can take 1-5 business days to settle, Stripe ACH payments take about 5-7 business days to settle due to further processing between Stripe accounts and RDFIs.
What is the Difference Between Envestnet | Yodlee and Stripe?
At first glance, understanding the difference between Envestnet | Yodlee and Stripe can be tricky.
It’s important to remember that Envestnet | Yodlee is a market leader in financial data aggregation, and we use our enriched data to verify bank account information of ODFIs. Stripe is the software that actually moves funds in the transaction, and the platform users can manage all their payments from.
Stripe ACH Payments With Envestnet | Yodlee
Using Envestnet | Yodlee and Stripe together creates a powerful ACH payment processor that Stripe users can count on to quickly and accurately authenticate financial information. Envestnet | Yodlee connects users to it’s comprehensive database of financial data from sources around the world.
If your business is considering accepting ACH payments, be sure to understand Nacha Compliance standards so you don’t run into trouble as you grow and expand your business.
