Small Businesses Don't All Speak ACH

When small businesses use digital banking channels, something sometimes gets lost in translation. There's a language barrier between smaller businesses or nonprofits and their banks that threatens the future adoption of electronic transaction processing.

In an attempt to sell automated clearing house (ACH) payments, Empire Bank is using a mix of education and marketing. "If knowledge is power, we want to get people to understand …we are out there trying to start a dialogue with businesses," says Sandy Jensen, vice president, commercial banking services for Empire Bank.

Faced by competition on all sides — from larger banks, PayPal and alternative payroll providers such as QuickBooks — the $1 billion Springfield, Mo. bank has been targeting churches, non-profits and rental property owners in an attempt to get them to adopt ACH payments. It's doing this through in-person visits, marketing and participation in programs such as NACHA's campaign to standardize ACH language and messaging.

Jensen says most people know what direct deposit is, but other terms such as "debit" or "credit" can trip people up because they don't always mean the same thing in banking, business or accounting. "The lingo is backward in banking …and businesses can get confused if they are paying money in or out," Jensen says.

In accounting, a decrease in an asset account is a credit, while an increase to a liability account is a debit. In banking, the perspective is different — the increase in a customer's asset account is a "credit" (to the customer, that's a "debit" because his or her asset account is getting larger). These differences are mostly invisible to consumers, but can crop up for businesses that have more complicated balance sheets.

Jensen says a debit to an ACH originating company needs to be thought of almost like the company has "accepted a debit card entry." She says because of years of the U.S. Department of the Treasury utilizing ACH for direct deposit, most businesses understand that doing a direct deposit will pay their employees, but when the business owners see "pre-authorized debit" they can become confused as to what this means to them.

"In the event of an ACH corporate debit or credit, it is even more confusing," Jensen says. "They understand a 'vendor payment,' and they also understand cash concentration vs. cash disbursement. When I sell to business customers, and the smaller to medium sized customers that we are all trying to target, many times there is confusion. If there was a more standardized term that was marketed and vendors used the term, it would attract more interest in ACH origination from business customers," Jensen says.

The bank's outreach will come in the form of fliers and information given to consumers in teller lines selling the benefit of pitching ACH to their employer or landlords as a service.

NACHA, a nonprofit that manages the ACH network on behalf of about 10,000 financial institutions, has been grappling with the ACH language issue for more than a year. It's launched a micro site and has been pushing stakeholders to use the phrase "via ACH" in digital and paper literature tied to ACH. ACH volume has been on the upswing lately following a sluggish period near the end of the last decade.