How Bank-to-Bank payments work

Bank-to-bank payments are facilitated via ACH (Automated Clearing House) in the U.S. and EFT (Electronic Funds Transfer) in Canada, currently supporting only debit ACH and EFT payments.

Limitations of bank-to-bank payments

• Longer funding times: Bank-to-bank payments typically take longer to process than credit card payments.
• No immediate reversals: Once a bank transfer is processed and batched, it cannot be stopped or reversed. Payments cannot be refunded until they have settled.
• Return and failure delays: Unlike credit card payments that provide immediate feedback on declined cards, failures in bank account payments may not become apparent for several days.
• Strict processing limits: You cannot process a single payment that exceeds your approved limit or exceed the number of payments you are underwritten for in a month.

ACH Payment Lifecycle
Initiation
The payment starts when either the merchant or customer initiates an ACH payment.

Submission
The bank or payment processor submits the payments to the ACH network, where it can be batched with other payments.

Clearing
The Federal Reserve checks and validates the payment details as the clearinghouse.

Processing
The Federal Reserve processes the payment by crediting the recipient’s bank account or debiting the payer’s bank account. This typically occurs within 1-2 days of payment initiation.

Settlement
The banks finalize the fund transfer through the Federal Reserve.

Funds availability
The transferred funds become available in the recipient’s account or are confirmed taken from the payer’s account. This typically occurs within 2-5 days of payment initiation.

While the typical timeline for ACH payments outlined is generally reliable, several factors can delay the timeline:

• Cut-off times: Payments initiated after the batch cut-off time may not be sent for processing until the next business day.
• Weekends and holidays: Weekends and bank holidays can add delays. Refer to U.S. bank holidays for ACH payments and Canada bank holidays for EFT payments.
• Bank policies: Different banks may have varying processing rules and times, which can affect the speed of payment completion.

ACH Payment States

DASHBOARD STATUS	API STATUS	DESCRIPTION	NEXT STEPS
failed	failed	The payment failed immediately upon attempt.	Review the payment details for errors and attempt to resolve them. Re-initiate the payment if necessary.
pending	pending	The payment has been initiated and is currently being processed in the ACH network. It has not yet been cleared or settled.	No immediate action required; monitor the payment status for updates.
succeeded	succeeded	The payment has successfully cleared and settled.	No action required.
returned	failed	The payment was returned by the recipient's bank for reasons such as insufficient funds, incorrect account details, or a stop payment request.	Review the failure code and address the reason for the return.