ACH Direct Debit

ACH Direct Debit is a popular payment method used in the United States and Puerto Rico as an alternative to credit and debit cards. The payments are processed through the Automated Clearing House (ACH), which is an electronic network for processing financial transactions.

To accept ACH Direct Debit payments, you must have a registered business entity in the United States.

The ACH network is unable to provide real-time authorizations. This means there is a risk of transactions being reversed if, for example, the bank account has insufficient funds. Additionally, consumers can dispute direct debit payments up to two years after the settlement date, claiming they did not authorize the payment or withdrew their authorization.

Payment type	Payment flow	Countries	Currencies	Recurring	Refunds	Partial refunds	Multiple partial refunds	Separate captures	Partial captures	Multiple partial captures	Chargebacks
Direct Debit	Direct	PR, US	USD

Account validation

When accepting ACH Direct Debit payments, we recommend verifying the shopper's bank account if that is a consumer account. See Nacha for more information.

You can do this verification as follows:

1. Collect the shopper's bank account number, bank routing number, and account holder name.
2. Before initiating the payment, pass these details in a zero-value authorization request.

We then validate the account through the gVERIFY solution from giact.
For instructions, see Account validation with giact.

ACH Company ID for B2B payments

An ACH Company ID identifies an entity like Adyen that collects payments through the ACH network. Unknown entities are often blocked when they collect payments from business accounts. The transaction will result in a chargeback with reason code R29, Corporate customer advises not authorized.

To prevent unnecessary chargebacks of business-to-business (B2B) transactions, ensure your business customers instruct their bank to add Adyen's ACH Company ID 8263863381 to the list of entities that are allowed to debit or credit their business account.

SEC code

Nacha requires that all ACH payments include a Standard Entry Class (SEC) code. This code identifies the authorization type for the payment. You must use the correct SEC code for your ACH direct debit payments to avoid compliance issues and potential fines from Nacha.

We support the following SEC codes:

• CCD (Corporate Credit or Debit): Used for one-off or recurring payments from business accounts. This code applies to business-to-business transactions.
• PPD (Prearranged Payment or Deposit): Used for one-off or recurring payments from consumer accounts. This code applies to one-off or recurring payments from consumer accounts when the authorization is obtained in writing.
• WEB (Internet-Initiated/Mobile): Used for one-off or recurring payments from consumer accounts where authorization is obtained online or via a mobile device.

A mismatch between the SEC code and the account type (for example, using CCD for a consumer account) can lead to a chargeback.

For Components or Drop-In integrations, the SEC code is handled automatically. For API-only integrations, you need to specify the SEC code.

Authorization from the customer

In addition to the SEC code requirement, Nacha requires that you have a mandate from the customer before initiating a one-off or recurring transaction. A mandate is an authorization form that specifies, among other things, the bank account; the type, frequency, and amount of the transaction; and information about how the customer can revoke the authorization. The customer must (electronically) sign the authorization. As an example, Nacha provides a sample authorization form.

Chargebacks

The ACH network is unable to provide real-time authorizations. This means that a payment can be reversed because of insufficient funds after the payment is authorized. Other reasons why ACH Direct Debit payments are reversed include:

• Business-to-business transactions can be reversed if your customer's business account does not have Adyen's ACH Company ID in their allowlist.

• Consumers can dispute direct debit payments up to two years after the settlement date, claiming they did not authorize the payment or withdrew their authorization.

  If an ACH Direct Debit payment is reversed, your Settlement details report shows a credit and a corresponding debit, and you receive a CHARGEBACK webhook with a chargebackReasonCode.

  You cannot defend ACH Direct Debit chargebacks. Depending on the reason code, it may be allowed to retry the payment. For an overview of the chargeback process, reason codes, and how to test chargeback scenarios, see ACH Direct Debit chargebacks.

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