What is Guaranteed ACH and Why's it Important?

There were 8.3 billion ACH payments in the second quarter of 2024, that’s an increase of 6.3% over the same period last year. 

ACH payments are trending up because they offer low transaction costs for merchants and streamlined experiences for consumers. 

Plus, new account-to-account (A2A) payment technology is layering on enhancements to modernize ACH transactions. 

Still, new solutions lead to misinformation. 

This post fully explains commonly misused term, "guaranteed ACH”, to protect your business from misrepresented details about ACH payment processing. 

First, what are ACH Payments?

ACH payments electronically move money from one bank account to another. 

“ACH” stands for Automated Clearing House, a network that is operated by the National Automated Clearing House Association (NACHA). Businesses, third-party providers, banks and credit unions send and receive electronic payments through this ACH network.

ACH payment processing times

The biggest drawback with traditional ACH payment methods is they take 2-3 days to clear — meaning funds sent on a Monday may not actually be moved until that Thursday.

This means money isn’t immediately available to merchants. At the same time, funds sit in a “pending” state for consumers. 

Also, the ACH network is only accessible during regular business hours (9 am - 5 pm, Monday-Friday) — they don’t process after hours or on the weekends.

Because of the gaps between the time a transaction is initiated and when the funds are actually moved, merchants are exposed to certain limitations. 

For example, a consumer may have enough money in their account when they initiate a transaction, but then move the funds out of their account before it clears. The merchant provides goods/services with the expectation of payment, only to find out later that payment was returned due to insufficient funds. 

ACH returns

An ACH return is an electronic payment transaction that's sent back to the original sender by the recipient's bank. 

This happens for a number of reasons, like: 

• Insufficient funds
• Account closed
• Stop payment
• Buyer’s remorse

Additionally, ACH transfers can be disputed by the person sending the ACH up to 90 days after the transfer. This means customers can request a refund for ACH payments up to 90 days after a transaction takes place. 

But ACH payments are evolving

While traditional ACH payments involve some risks and limitations due to the network’s processing times, they’re still very beneficial. 

The key benefit ACH offers merchants is low processing fees, which can save businesses up to 70% compared to card transactions. 

This is why ACH has become popular for use cases like recurring payments, direct deposits, and large sum transactions — it’s low cost for merchants and easy for consumers. 

To leverage the benefits of ACH while mitigating the risks, financial technology (fintech) companies like Aeropay have built advancements on top of the ACH network, creating a payment solution called account-to-account (A2A) payments. 

Unlike traditional ACH transactions where users input their account numbers and routing numbers to send funds, A2A payments use bank linking technology (like Aerosync) to enable direct bank login for users to establish a secure, live connection. 

This is accomplished using secure APIs between the bank aggregator and the customer’s bank, credit union, or other financial institution.

A2A payments are a next-generation approach to bank transfers, creating more complex risk evaluations and enabling a solution called guaranteed payments, which are not typically offered with basic ACH transactions.

What does guaranteed ACH mean? 

Guaranteed ACH payments transfer consumer funds immediately and entirely to a merchant’s bank account.

To do this, a guaranteed ACH provider acts as a “financial intermediary” between consumer and merchant — when a customer initiates a transaction via ACH, the provider pays out the merchant directly and shoulders the burden of payment collection from the consumer. 

In short, guaranteed ACH ensures, or “guarantees”, payments are delivered to merchants without the risk of returns or chargebacks. 

As a result, guaranteed ACH allows merchants to accept low-cost payments, while eliminating the uncertainty and risk that comes with traditional ACH payments.

How do guaranteed ACH payments work? 

Guaranteed ACH payments work by leveraging financial technology and advanced risk models to determine whether a consumer has sufficient funds available to cover their ACH transaction. 

The process looks like this: 

1. A consumer initiates an ACH payment, either online or in-store.

2. The guaranteed ACH provider checks the consumer’s account to verify if sufficient funds are available. 

3. Simultaneously, the provider assesses the risk associated with the transaction based on the consumer’s transaction history, available funds, and other factors.

4. When the funds are verified and risk meets an acceptable threshold, the provider guarantees the payment to the merchant. 

5. The merchant receives funds directly into their account, typically within seconds to minutes, regardless of when the ACH network processes the transfer.

6. The ACH provider handles the actual transfer through the ACH network. The provider also assumes the responsibility of collecting the money from the consumer’s bank account.

7. If a return occurs (e.g., insufficient funds or an account closure), the ACH provider takes on the liability of collection and resolution, ensuring the merchant isn’t affected by the return process.

‍Important note: Not all guaranteed ACH providers follow the above process. Many have specific conditions that impact the cost and effectiveness of guaranteed ACH transactions. Always consult a specialist and review the terms and process of any guaranteed ACH provider you’re considering.

Why are guaranteed ACH payments important?

Guaranteed ACH payments are a useful tool for merchants looking to add the benefits of ACH payments without the added risks — which are mainly ACH returns. 

Benefits of guaranteed ACH payments include: 

Real-time fund availability - Unlike traditional ACH payments that take 2-3 days to clear, guaranteed ACH ensures merchants receive real-time payments, reducing cash flow gaps and improving financial planning.

Certainty for transactions -  Guaranteed ACH transactions are a successful and instant form of payment, so merchants do not give up inventory before getting paid. This eliminates the risk of revenue reconciliation and consumer dissatisfaction. 

Lower cost - Guaranteed ACH offers significantly lower fee pricing compared to debit or credit card payments. 

No risk of returns: The provider assumes the responsibility for any potential returns, insulating merchants from the financial impact of chargebacks.

Who needs guaranteed ACH payments? 

Guaranteed ACH payments are particularly beneficial for certain industries and use cases. Below are some examples where guaranteed payments have seen considerable success. 

Landlords

For landlords, guaranteed ACH rent payments are highly beneficial because they eliminate the risk of bounced checks or returned payments. Instead, rent payments are delivered on time every month from a simple payment link.

Online gaming

Chargebacks are incredibly common in online gaming because players are more likely to file disputes to recoup their losses. This is referred to as buyer’s remorse and it’s the most common type of dispute in daily fantasy sports. There is a 28% chance a player will dispute again if they can do so the first time. 

While guaranteed ACH theoretically benefits gaming companies, many guaranteed ACH payment options only protect against non-sufficient funds or closed accounts, not buyer’s remorse.

For large and small businesses operating in industries like Daily Fantasy Sports, this means close to 40% of your ACH returns aren’t protected by guaranteed ACH. 

Tip: Check out Aeropay’s solution for the gaming industry — it has a 95% acceptance rate, guaranteed player deposits, and instant payouts. 

Subscription services & online billing

The subscription and billing sector is notably susceptible to chargebacks and friendly fraud when account holders forget to or fail to recognize a recurring charge.  

Guaranteed ACH helps subscriptions and recurring payments maintain timely payments, without interruption or cumbersome recoup processes. 

The truth about guaranteed ACH

Guaranteed ACH payments come with many benefits and they’re highly valuable. But not all providers are the same, and many have limitations that merchants aren’t aware of up front. 

Many guaranteed providers don’t cover all returns

Some of the most prominent guaranteed ACH providers will initially guarantee a payment only to later charge additional fees for any returned transactions.  

Even though these providers have lower upfront costs, their ACH solution often ends up being more expensive because their guaranteed payments don’t actually cover key return risks, like insufficient funds.

Some guaranteed ACH providers bring down acceptance rates 

Some guaranteed ACH transfer providers implement additional verification steps and criteria to fulfill their “guarantee.” The problem with this approach is it filters out legitimate transactions and deters potential customers.

In fact, guaranteed ACH payments have an average acceptance rate of only 60-70%.

This approach can lead to frustratingly low acceptance rates for merchants, especially when the average transaction amount doesn’t align with the vendor’s predefined rules.

Low acceptance rates = less transactions and lower earned revenue.

Some providers don’t use effective risk models  

Not all guaranteed ACH processing partners have the functionality to track users across multiple merchants — meaning each interaction creates a new user ID in their system.

When a user enters a new platform for the first time and links their checking account, there is no prior information about this individual’s financial habits. 

This fragmentation limits the ability of payment processors to accurately predict returns, meaning legitimate transactions are blocked and acceptance rates are lowered.

Aeropay's guaranteed ACH payments lead the industry

Aeropay’s unique approach to account-to-account payments ensures businesses get the highest top-line revenue possible. 

Instead of simply “guaranteeing” certain ACH transactions, Aeropay takes a balanced approach to mitigate returns and maximize acceptance rates.  

Our advanced model adapts to the complexities of A2A payments, dealing with over 50 return codes, predicting user funds at the time of the transaction, and managing dispute patterns.

The result: 95% of Aeropay transactions are approved, allowing for more players and higher rates of customer satisfaction.

See why business owners across the country choose Aeropay for guaranteed ACH payments. Book a demo to get started.