Articles by Sean Murray

ACH is the Annoying Little Thing We Can’t Live Without

A few months ago I paid an invoice via ACH. The vendor was used to getting paid by check and didn’t accept credit cards. When I mentioned the funds would be paid overnight, they got excited but were suspicious. Would there be a fee to receive the money like a Fed wire might? “Nonsense,” I told them.

When the banks opened the next morning, they didn’t see it. The funds had been withdrawn from my account and I double checked that the account and routing number matched their voided check. They took no comfort in that verification of course because they didn’t see the money on “their side.” That put the burden on me to convince them nothing had gone wrong or that I wasn’t lying. “It should be there,” I told them. “Who knows, depending on your bank it might not post until tomorrow.”

Let’s spend all day researching this payment

Putting the blame on the recipient’s bank or the ACH system as an imperfect fluid thing that comes with no guaranteed delivery schedule only heightened their levels of suspicion.

If you’ve been in this situation before particularly when funding a merchant who claims the funds are not there, there is only so much you can say or do to pacify them.

“Can you give me some kind of confirmation number?” they ask. Ahh, the mythical confirmation number.

So you call your bank, get some kind of number and pass it along to them which their bank does nothing with because they have no record of any incoming payment.

At the vendor’s behest, I went back and forth between my bank and their bank to try and locate these funds. The quest to find the missing deposit took up the first six hours of my day. Honestly I wasn’t worried about it. I was pretty sure it would show up eventually, but the vendor was freaking out.

With the work day almost over, the receiving bank finally logged a pending deposit in the vendor’s account.

It was good enough for them. They finally believed me. Phew.

You got the money, right?

How do I know my vendor actually got the money? Well because they told me they did…

Good enough perhaps, but a few years ago I helped a merchant get financing that claimed they did not receive their funds even though I was pretty sure they did. I went through the whole shebang, ACH system this, your bank that, confirmation number this, let me double check that, etc.

Three days later they claimed they still had not gotten it. It turns out they had but they knew without direct access to their bank account, we couldn’t confirm it, at least not in time to try and reverse the transaction successfully. Did we screw up somewhere? Was the routing number right? It’s a horrible feeling to believe you didn’t deliver what you promised you would to a merchant.

After more than a week we had figured out he not only received the cash, but had moved the money out of the account and bailed.

Once the money goes into the ACH system, you really don’t know anything. Some alternative lenders can confirm clients received deposits by requesting the client’s username and password to log into their bank account. This is a terribly flawed system.

Out there in the regular world I couldn’t have asked my vendor for the credentials to their online banking. Oh you didn’t get the ACH? Give me the password to your bank accounts, I’ll go have a good look.

You call this efficient?

In 2015 I can send money and have no idea if the other person got it. Somehow this is standard. It’s like e-mail in a way. I know I sent it but until they tell me they received it, who really knows.

There are obviously options to transfer money instantly but it comes at a great cost. And someone still has to tell me it got to the other side. I can’t confirm it myself.

In the age of the Internet, it’s amazing how inefficient payments are. We refer to modern payment processors as disruptive services, but it’s same problem with a different twist. Somebody pays you by credit card and the payment processor flags the sale, causing you to have to send documentation to their risk department to review. If rejected, the funds are held for six months and quite possibly your merchant account terminated. The customer won’t know all this though. All they knew is that their card was charged.

Intermediaries make transaction processing easy but they also make it really hard. The alternative lending industry spends entirely too much time managing payments.

The ACH debit was successful… or was it? Let’s wait 3 days to find out if it gets reversed before we really know for sure.

Did they get the money? Let me call them to confirm. Oh they didn’t pick up. I’ll write them an email asking them to confirm that they got my ACH.

They said they sent the money but I don’t see anything. Can you send me a confirmation number?

I sent you that email on thursday, you didn’t get it?

We’re used to a system where the only thing you can confirm is that something was sent and so we spend countless hours and money trying to figure out if they were received.

Meanwhile, in the future…err present day

One of the most remarkable features about the Bitcoin system is that I can confirm that the money I sent was received by the other person. Everyone else in the world can confirm it too. The dollar/bitcoin balance of all bitcoin addresses are public and anyone can create a near infinite number of bitcoin addresses.

I joked before that in order to truly see with my own eyes that a vendor did not receive my ACH was to request the credentials to their online banking and log in. But all they need to do is generate a one-time use bitcoin address for the transaction and when I send funds, both they and I will see it deposited there, instantly.

Money sent, they got it instantly, I see it there, end of story.

Recently, .01 BTC was sent to this bitcoin address of mine: 19kzD1RkC8MjazfCkCJkfx7369ULCyPsg1

Check it out here: http://bitref.com/19kzD1RkC8MjazfCkCJkfx7369ULCyPsg1

or here: https://blockchain.info/address/19kzD1RkC8MjazfCkCJkfx7369ULCyPsg1

If you needed to pay me, I would click a “generate address” button on my computer, you send bitcoins to it, and there will be no doubt that they were received because you can view the balance of it yourself. I can keep the funds in that address or move them to another one. Even if moved, the paper trail that they were there remains. There is no uncertainty or research required.

So who confirms the transactions? Not the Automated Clearing House thank God. Bitcoin miners and nodes do. You can read about my experience as a miner here.

At present, the standard bitcoin network transaction fee is .0001 BTC, the equivalent of 2 cents. Transactions are also irreversible! No chargebacks!

You can send me a thousand dollars or a million dollars instantly for the price of 2 cents and view the balance in my receiving address as proof that I got it. Thousands of people do this every day.

Bitcoin’s adoption has been slow, it’s history volatile, and its reputation murky, but I pray everyday that a decentralized technology like this will last in the mainstream. The bureaucracy, inefficiency, and lack of transparency in other forms of payments are a drag on commerce.

If you’ve ever spent longer than a minute trying to figure out if money made it from point A to point B, you need to start learning about the Bitcoin system. If you’ve ever spent more than 2 cents sending money, you need to start learning about the Bitcoin system. And if you’ve ever had a payment processor give you a hard time about a transaction, you need to start learning about the Bitcoin system.

You might be happy with ACHs for now but we were all happy with telegrams once. That’s about the level of sophistication the mainstream payments industry has now. I can’t wait until this era is over.