Which is the better payments option for your business: ACH or wires?

A quick comparison on the most efficient way your business could send money.

For businesses needing to transfer money from their own bank account to another housed within a different financial institution, both wire and ACH (automated clearing house) transfers are two of the most popular options available. The one you choose helps ensure your vendors and other payees are paid on time—and securely.

But how do you know whether either is truly right for your business?

Depending on your business’s situation, one option might actually be more cost effective and secure than the other—and you might not know it. Picking the right option for your business could help optimize your cashflow, protect your business from fraud, and improve your relationship with your external business partners.

Wire vs. ACH Transfers: A Breakdown of Benefits

Here’s a basic breakdown of some key considerations when exploring whether wire or ACH transfers are your business’s best option for transferring money moving forward:

Cost

Wires are generally the most expensive form of payment available to a business—and the more money you wire, the more expensive it is to do so. For example, a domestic wire transfer could cost anywhere from $25 to upwards of $100 per transaction—which adds up over time. Not to mention that, if your business operates internationally, wires with international destinations are typically even more expensive. In addition, wire transfer fees are generally for each transaction, regardless of whether you’re trying to send one or many at the same time.

In comparison, ACH transfers typically only cost a few dollars to process—especially since so many ACH transfers can be batched together. So, whether you’re trying to make one or many payments all at the same time, the fees remain far lower than those of wire transfers.

Advantage: ACH

Security/Fraud Prevention

Wire fraud continues to be a global issue, as it’s a popular payment method used in various social engineering scams (e.g., phishing emails, corporate business email compromise scams). That’s in part because wire transfers can be sent quickly and, once they’re made, are almost always irrevocable and final.

Wire transfers are difficult to reverse (especially for the full amount); to do so, the sending bank is required to request the transfer be returned, but the receiving bank is not obligated to do so, and they aren’t required to have the full amount of the wire to send back. This all makes it far more difficult for law enforcement agencies to retrieve funds unknowingly sent as part of some type of scam.

ACH transfers, meanwhile, have far more controls enabled to help ensure funds don’t end up in the wrong hands—and if they do, they can be recalled far more easily than wire transfers. Before ACH transfers are sent, certain solutions offered by banks provide authorized account signers the ability to review who is receiving what and when and ultimately decide to approve or decline a transfer. ACH transfers can be reversed, stopped, cancelled, and returned so long as the action is completed within a specific timeframe (e.g., within 48 hours for business transactions, and up to 60 days for consumers). 

Finally, when receiving an ACH debit into a business account, companies can implement ACH Positive Pay, allowing businesses to automatically return an ACH debit on their account, or review and decision, if key elements are not recognized and match against a payment originator.

Advantage: ACH

Payment Timing

One big advantage to using wire transfers is that, once they’re dispatched, the funds settle into the recipients’ account almost immediately.

On the other hand, ACH transfers typically settle 1-3 business days after they’re dispatched. Same day ACH transfers of up to $100,000 (for both sending and receiving) are available, but they must be made by a specific deadline in order to settle the same day it’s dispatched. The good news is that this deadline continues to move later in the day due to NACHA rules changes. The most recent change occurs on March 19, 2021, offering a third Same Day ACH origination window. (Talk to your Treasury Management Consultant about the deadlines involved with same day ACH transfers.)

Advantage: Wire

Convenience in Both Making and Collecting Payments

Wire transfers are primarily used by businesses to make payments—not for collections. There is a method for using wire transfers to do so (referred to as a drawdown wire), but it’s not an efficient nor prevalent process—especially compared to capabilities afforded by ACH transfers.

That’s because ACH transfers allow for both payment disbursement and collection capabilities. Either process is simple to set up, and it costs a lot less to do either compared to wire transfers.

Advantage: ACH

Scheduling Multiple Payments

Also referred to as “batch processing,” it’s possible to send a group of payment recipients a payment via wire transfer (referred to as batch wires), but it’s not necessarily a readily available solution in most financial institutions, as other methods for doing so are more efficient. Batched wire transfers are typically expensive due to fees associates with each payment, and successfully distributing them often requires the support of IT resources.

ACH transfers can be batched together and then distributed with little human interaction required. You can also schedule ACH transfers to occur in the future so that they’re ready to go when you are, providing greater cash management predictability and cash forecasting accuracy. And, like single ACH transfers, the cost to do an ACH batch would remain low compared to the same transaction done via wire transfer.

Advantage: ACH

Is it Time to Switch to ACH?

Between convenience, cost, and security, ACH transfers may be the better payments solution for your business. If you’re looking to learn more about how ACH could help your business, click here to schedule some time to talk with one of our ACH specialists to see if the solution is right for you. Consider also checking out this article by one of our own Treasury Management Consultants on virtual solutions that may further support businesses in the changing economy.