ACH vs. Wire Transfer: Which Is More Secure?  

October 15, 2021

ACH transfers are typically safer than wire transfers. With ACH, funds are reversible in fraud or payment error cases, and the criteria banks use to determine these reversals will vary according to each institution’s policies (though typically, it would depend on how much was lost).  

Consumer electronic payments and electronic transfers are on the rise and will likely continue to do so. In 2016, global non-cash assets and transfer of funds grew by 10.1%, reaching $482.6 billion, according to a recent study by the World Bank.  

Electronic payment options are safer, faster, and less expensive. Electronic fund transfers (EFT) are becoming increasingly common and have generally made payments easier to send and receive than bank transfers. Such payments generally fall into two categories: automated clearing house (ACH) payments and wire transfers.   

In this article, we compare the two electronic payment options in terms of security and look at other differences between the two. But, first, a look at what the two electronic payment options entail.  

What is an ACH transfer?  

An ACH transfer is an electronic method of transferring funds through the Automated Clearing House network from one bank to another. To process an ACH transfer, funds are requested from the originating bank account and moved into the receiving bank account. ACH transfers are generally done in groups or batches and can take a few hours to several days to complete.  

The Automated Clearing House network is a network of financial institutions, including banks and credit unions, batching transactions between them, guided by the rule-making organization, Nacha. ACH is a US-only network, thus not available for payees outside the United States.  

Some people may refer to ACH payments as either direct deposit or direct pay via ACH. ACH transactions are lower cost than wire transfers, but they can take longer to land in the payee’s bank account, which delays when you verify that the payment was received.  

What is a wire transfer?  

Wire transfers are electronic interbank payments used to transfer funds directly from one entity’s bank account to another’s. Wire instructions include the bank account number and ABA bank routing number for the payee receiving the money.   

Each financial institution sets its cutoff time policy for sending same business day bank wires. With wire payments, funds are immediately available within 24 hours upon arriving in the payee’s bank account. Once funds have been wired, because of the immediacy, recalling erroneous transactions is much more difficult. When sending money via wire transfer, especially at high volumes, transaction fees can be high.  

Wire transfers are well-suited for constantly changing cross-border payments made by parties in the transaction to bank accounts located in different countries.   

Payment Security in ACH & wire transfer: Which is safer?  

In terms of security within ACH and wire payments, there are many apparent issues and an array of options. For example, criminals can hijack money transfer messages or initiate fraudulent transfer messages. Wire transfers (and international transfers) claim to be secure if the transactions are legit and do not come from fraud. However, wires are used in scams most of the time.  

Usually, fraudsters who try to start any fraud will use a simple trick of posting phishing schemes that encourage users to click on an email link to a fraudulent website designed to look like authentic ones. They can also send an email that looks like an escrow company’s email to a real estate agent asking for funds to be moved to the scammer’s bank account instead of the seller’s bank account payment in a real estate transaction.   

In 2016, The CFPB issued the federal government rules for remittance offered more than $15 to protect consumers. They are those who make cross-border electronic payments to other countries outside the US by using wire transfer, ACH transactions, or transactions made through retail “money transmitters.”  

The CFPB rules require upfront disclosures for the following:  

  • All fees, taxes, and the exchange rate, including those charged by agents abroad and intermediaries 
  • The time the funds will be available at the destination 
  • A receipt or detailed amounts equivalent to a receipt in the disclosure 
  • The right to cancel the bank wire transfer within a short time window of up to 30 minutes  
  • What to do in case of an error  
  • Guide to submitting complaints  

CFPB rules also discuss other protections, such as canceling on time to get money back or what payment transmitting companies should do. They need to investigate errors when a consumer reports a problem to them and give consumers a refund or resend the transfer again free if the money did not arrive.  

In terms of ACH transfers, banks (via the bank to bank networks) securely maintain electronic transfers. However, it is still possible for users to suffer from having a fraudulent vendor invoice or supplier in the payables system. Luckily, ACH provides automated payables, global mass payments software apps, and comprehensive fraud prevention controls to avoid this risk.  

 Although both transfer methods are secure, ACH electronic method edges out wire transfers in safety and security. Because ACH payments pass through clearinghouses, each payment is subject to more rules, regulations, plenty of time, and scrutiny. At the same time, if a mistake or fraudulent transaction occurs, most ACH transactions can be reversed--even if it’s a direct deposit. In contrast, wire transfers, as well as international wires and international payments, cannot.  

Wire transfers, as a type of transfer, aren’t as secure as ACH payments; they are still safer than cashier’s checks in moving funds between accounts. Because cashier’s checks are paper checks, they are more susceptible to fraud or forgery. However, when sending money via wire transfer, the sender must confirm the recipient’s banking details through transaction records, such as routing and account number. If this information is correct and not transposed, wire transfers are still considered safe electronic transactions.  

According to data from NACHA, fewer than 0.03% of ACH transactions reverse as unauthorized. That is a high level of safety by any standard, despite rising concerns over cyber security.   

Comparing ACH payments and wire transfers  

 Business to Business (B2B) Payments  

For large business-to-business payments, such as commercial real estate or M&A transactions, wire transfers make sense. If you’re sending a small amount, wire fees aren’t a big deal because the amount you’re sending is small.  

B2B payments companies frequently utilize ACH APIs and bank APIs.  

Vendor, supplier, and other payment automation software is highly efficient. Due to the high volume of bill payments made by businesses, the low fee ACH payments are preferable to wire transfers.  

Personal Payments  

Wire transfers make sense for large personal residential real estate purchases, including down payments and international payments.  

Customers can choose to pay for international money transfers made through the Western Union money transfer services system with a wire transfer using their bank account. Western Union calls this method a wire transfer payment option. Banks allow individuals to use ACH for bill payments through their online bank accounts.   

Costs & Fees  

Wire transfer fees for domestic transactions range from $20 to $100 to send, receive, or act as an intermediary in a wire transfer transaction. International wire transfers are more expensive. Each bank sets its wire transfer fees and any other costs, including service fees and investigation costs, and any wire resubmission fees for which CFPB rules do not protect consumers.  

ACH transfers are increasingly becoming the go-to payment method, especially for mass payments. Lower cost and less risk (in some cases) make ACH an attractive option. ACH payments tend to be better suited for transactions where the amount is smaller or the frequency is more regular. The Federal Reserve’s plan under consideration to move to real-time ACH payments and settlements would make ACH an even more attractive payment method. 

BNG Payments is payment processing made easy. Whatever your processing needs, we make it easy for merchants to accept credit and debit cards, mobile payments, e-commerce, and more. Contact us to find out more about what BNG Payments can do for your business. 

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