ACH vs Wire Transfer: Differences and What to Choose

Back in 2022, SWIFT, a write transfer network, reported processing 42 million financial transactions daily. At the same time, over the year 2022, the ACH network processed more than 30 billion transactions. 

As you can observe, both payment methods are popular. However, which one should you adopt as a business that sends or receives payments or, as an alternative, provides such an opportunity to your customers? Well, let me shed some light on the topic and figure it out together. Maybe, at the end of the day, the right call is to have both options available. 

In this post, you’ll discover how ACH vs wire transfer differences and how these payment methods work technically. Besides, you’ll find out which one is more suited to the payments you utilize in business. I’ll also share a list of ACH and wire transfer providers I have worked with personally and can recommend. 

What’s an ACH Transfer?

Let’s get started by acquiring an in-depth understanding of both payment methods before proceeding with the actual ACH vs wire payments comparison: 

An ACH transfer is an electronic funds transfer made through the Automated Clearing House (ACH) banking network.

It’s possible to distinguish two main categories of ACH payments:

• ACH direct deposit: It covers cases when a government entity or a business makes payments to an individual. 
• ACH direct payment: It covers cases when an individual or business sends money through the ACH Network by utilizing a debit and credit system to transfer money from one bank account to another.

These were categories of ACH transfers. However, I believe the need to review examples of regular ACH transactions to know all cases that fit within direct deposit and direct payment transfers and, in general, are supported by the ACH network.

Examples of supported ACH transfers include:

1. Direct deposit of payroll from employers to employees.
2. Automatic bill payments for utilities, loans, and subscriptions.
3. Social Security and other government benefits deposits.
4. Tax refunds deposited directly into bank accounts.
5. Recurring mortgage or rent payments via bank transfers.
6. Peer-to-peer payments using services like PayPal or Venmo.

You may be surprised to find out that ACH covers most of regular, everyday transaction needs. Simplicity and convenience are what lie at the heart of the ACH transfer concept.

How an ACH Transfer Works

ACH network is primarily intended to facilitate the movement of money between banks in the U.S. With it, there’s no need for an additional financial institution to act as an intermediary, and only a sender’s bank is responsible for the entire transaction. Individuals and businesses can request and second money transfers independently. From my experience, this approach is somewhat confusing to individuals and businesses that are used to regular payment processing, with both a sender’s bank and a receiver’s bank directly involved. 

You may discover more about conventional transaction processing with payment gateway and payment processor in another blog post by DashDevs. 

Another distinct characteristic of such transfers is that they are processed in large batches, the effects of which we’ll review later on in the post. 

You can see how an ACH transfer works in the infographics below:

Additionally, I provide a step-by-step ACH transfer flow to complement the infographics and ensure that you have the broadest picture possible here:

1. Initiation: The sender authorizes a transaction, such as a bill payment or payroll deposit.
2. Batch processing: The bank groups transactions into batches and sends them to the ACH operator.
3. Clearing: The ACH operator processes the transactions and routes them to the receiving bank.
4. Settlement: The receiving bank credits or debits the appropriate account.
5. Completion: Funds are typically available within 1-3 business days.

You may be additionally interested to explore cross-border payment methods and currency exchange principles in another blog post by DashDevs. 

What’s a Wire Transfer?

As a company operating across many regions, DashDevs has even larger experience with wire transfers, as they are not limited to the U.S. only and are demanded more often. 

A wire transfer, also known as interbank payment, is an electronic method of sending money from one banking institution to another, either domestically or internationally. 

Wire transfers are suited for larger, one-time payments. Urgent, high-value transactions are exactly what wire transfers are for. 

As far as I know, wire transfers are not commonly distinguished into separate categories. Yet, let’s name two wire transfer types based on the regional specificities of the parties involved:

• Domestic wire transfers: These transfers occur between banks within the same country. 
• International wire transfers: These involve sending money from one country to another. 

And, without further ado, let’s review typical wire transfer uses.

Examples of common wire transfers include:

• Real estate transactions, where large sums are transferred between buyer and seller accounts.
• International money transfers for business or personal use are sent between banks in different countries.
• Paying for high-value goods such as luxury vehicles or expensive equipment.
• Sending emergency funds abroad for family members or friends.
• Corporate payments for mergers, acquisitions, or large business deals.
• Loan settlements or payments made directly between financial institutions.

Once again, wire transfers, due to their characteristics which we are yet to review, are used on particular occasions rather than on an everyday basis. 

How a Wire Transfer Works

Wire transfer involves the direct transfer of funds between banks or financial institutions, typically processed one by one, unlike ACH transfers. Suited for larger, one-time payments, wire transfers need the direct involvement of both a sender’s and a receiver’s bank to execute. 

You can see how a wire transfer works in the infographics below:

Just like with ACH transfers, I provide a step-by-step wire transfer flow to complement the infographics and provide you with a complete insight: 

1. Initiation: The sender provides their bank with details, including the recipient’s name, bank account number, and the receiving bank’s routing number.
2. Verification: The sender’s bank verifies the information and ensures sufficient funds are available.
3. Transfer: The sender’s bank sends the funds electronically to the receiving bank through a secure system like SWIFT or Fedwire.
4. Notification: The recipient’s bank receives the funds and notifies the recipient.
5. Completion: The funds are typically available to the recipient on the same day or within a few hours.

Here, I have to get back to the concept of ACH transfers. As we already know, such payments are conducted via the U.S. ACH network. Guess what — wire transfers use similar banking networks, and we just ought to have a quick glance at them.

Wire transfer networks and systems:

• SWIFT (Society for Worldwide Interbank Financial Telecommunication)
• Fedwire, a U.S. real-time settlement system backed by Federal Reserve
• CHIPS (Clearing House Interbank Payments System)

As you can observe from this technical ACH vs Wire transfer explanation, these two methods are grounded on different principles. Yet, they still have a lot in common as they both are basically just variations of the same conventional payment processing methods. Just distinct networks and backend processing paradigms. 

Important note! I’d love to point out that DashDevs has an all-in-one white-label payment solution — Fintech Core, which allows the development and launch of neobanks fast. 

In this fintech product, we pre-integrated modules that support neobanking features, like card issuing, cross-border payments, and more, including both ACH and wire transfers. So, should you need a standalone payment software with these methods included or just add such capabilities to your digital product, don’t hesitate to ask us for tech assistance. 

Explore Fintech Core 

Differences Between ACH and Wire Transfers

If you are looking for an extended explanation of every difference between ACH and Wire transfer, then it’s exactly the right part of the blog post. Let’s compare these two payment methods by eight main factors:

#1 Transfer speed 

Wire transfers are significantly faster than ACH transfers and are often processed on the same business day in the case of domestic transactions. Some wire transfers may even occur within a few hours, making them ideal for time-sensitive payments. However, holidays, human error, or differences in time zones can occasionally delay the transfer by a day or two.

In contrast, ACH transfers typically take 1-3 business days to process, although expedited options may shorten this to same-day transfers. Nonetheless, they still lag behind wire transfers in terms of overall speed.

• When it’s important: Situations where delays could have financial repercussions, such as legal or contractual obligations, large one-time transactions, or emergency fund transfers.
• When it’s not important: Routine payments, such as payroll, recurring utility bills, subscription services, or non-urgent vendor payments, where speed is not a critical factor and cost savings matter more.

Winner: Wire transfer

#2 Settlement 

ACH transfers benefit from batch processing, which allows multiple transactions to be settled simultaneously. This collective settlement process is more efficient and reduces administrative overhead, making ACH transfers popular for payroll, bill payments, and recurring transactions.

Wire transfers, on the other hand, operate on a one-to-one basis. Each wire transfer settles individually, which ensures faster availability of funds but results in a more resource-intensive and costly process. Therefore, ACH transfers may be more suitable for bulk payments requiring efficient settlement.

Winner: ACH Transfer

#3 Cost 

ACH transfers are much more affordable, often free or costing only a few cents per transaction. Many banks charge little to no fees for ACH transfers, particularly for routine transactions such as payroll, bill payments, and small business transfers. This makes ACH ideal for frequent, low-cost payments.

Wire transfers, in contrast, come with higher fees. Domestic wire transfers typically cost between $20 to $35 per transaction, while international transfers can exceed $50. Even receiving a wire transfer may incur additional fees, making it more expensive for both sender and recipient.

Winner: ACH Transfer

#4 Direction

ACH transfers are bidirectional, meaning both the sender and recipient can initiate transactions. This flexibility is particularly useful for recurring payments, direct deposits, or pulling funds from a customer’s account with their consent.

Wire transfers, however, are unidirectional; only the sender can initiate the transfer. Once initiated, the funds are pushed from the sender’s account to the recipient’s account. This limited directionality gives ACH transfers an edge in scenarios requiring automated or recurring payment processes.

Winner: ACH Transfer

You may be interested in exploring transaction processing systems (TPS) to complement your knowledge of payment transfer use cases. 

#5 Frequency 

ACH transfers are well-suited for high-frequency, recurring payments. Whether it’s payroll, bill payments, or subscriptions, ACH systems are designed to handle transactions that occur regularly. The lower cost and automated nature of ACH transfers make them ideal for businesses and individuals managing multiple transactions over time.

Wire transfers, on the other hand, are generally reserved for one-time or infrequent payments due to their higher costs and the manual initiation required. They’re best for large, occasional transactions rather than recurring payments.

Winner: ACH Transfer

#6 Size 

Wire transfers excel when it comes to handling large transaction sizes. Most banks allow for substantial amounts, sometimes with minimal restrictions on the upper limit, making wire transfers the preferred option for significant payments, such as real estate purchases or international deals.

ACH transfers, however, are usually subject to daily or per-transaction limits, often capped at a few thousand dollars. These limits can make ACH unsuitable for large, single transfers but perfectly adequate for smaller, routine payments.

Winner: Wire Transfer

#7 Risk

ACH transfers are generally considered lower risk for senders due to their ability to reverse transactions in cases of fraud or errors. The involvement of the Nacha network also ensures additional oversight, making ACH payments safer for routine transactions.

Wire transfers, while secure for recipients, carry more risk for senders. Once initiated, they are almost impossible to reverse, even in the event of fraud or error. This irreversibility poses a significant risk, especially for large transactions.

Winner: ACH Transfer

#8 Security

ACH transfers are managed and monitored by the National Automated Clearinghouse Association (NACHA), providing a layer of oversight that enhances security for both senders and recipients. The ability to reverse payments in case of mistakes or fraud further bolsters ACH’s reputation as the more secure option.

Wire transfers are secure in terms of verifying sender identity, as the preventive measures banking networks implement are normally strong. However, they lack the ability to reverse funds. Once completed, the transfer is final, leaving little recourse in the event of fraud or a misdirected payment, making ACH the safer choice overall.

Winner: ACH Transfer

Here’s a table comparing ACH transfer vs wire transfer characteristics:

Yet, I’d rather not claim that one transfer type holds a significant advantage over another one. From my experience, U.S.-based companies tend to leverage both in their software products. After all, ACH and wire transfers were designed to suit different fund transfer needs and scenarios. That’s exactly what we’ll review in the next section. 

ACH vs Wire Transfers: What to Choose? 

Most commonly, businesses that reach out for DashDevs development assistance and are interested in ACH and Wire transfer integration have two concrete payment scenarios in mind.

The first one is Business-to-Business (B2B) payments. They occur, for example, when a wholesome supplier receives payments for raw materials or equipment from other companies via a web platform. Another one is personal money transfer between individuals or when an individual purchases from a business online. Let’s delve into these scenarios:

#1 B2B payments

• ACH. ACH is incredibly usable for batch processing vendors and in the case of recurring B2B payments. Relatively small volumes and a large amount of non-urgent bill payments justify using a small-fee ACH system.
• Wire transfer. Wire transfers make sense for high-dollar B2B payments like commercial real estate transactions or Mergers and Acquisitions (M&A) transaction payments. In these cases, wire fees are not considered high in relation to the transaction amount, especially when transaction fees are fixed. Besides, business owners appreciate when important payments are conducted swiftly.

#2 Customer personal payments, both Peer-to-Peer (P2P) and direct marketplace purchases

• ACH. Most huge marketplaces, such as Amazon, eBay, or Etsy support ACH transfer indirectly through third-party payment processors like PayPal, Stripe, or Plaid. So, it’s possible to conduct direct marketplace purchases easily. The same concerns P2P payments, although some users may find the necessity to wait for several business days for funds to be settled in their banking account a bit inconvenient. 
• Wire transfer. As mentioned earlier, wire transfers make sense when it comes to large personal purchases like residential real estate. Alternatively, individuals may not have other options for cross-border payment but a wire transfer. So, on these occasions, wire transfer is the only right choice.

Note. I understand that your company is not engaged in P2P transactions directly and you may be wondering why even bother to mention P2P transactions. However, you still may consider providing payment products, such as mobile wallets, as your main or complementary offering. If that’s the case, you will have to deal with P2P transactions. 

Integration of ACH and wire transfer functionalities requires substantial fintech experience and expertise. Don’t hesitate to request custom web development services from DashDevs should you need assistance. 

ACH and Wire Transfer Providers On the Market

Finally, with the acquired understanding of ACH vs Wire transfers as well as their differences and uses, we reached the final section of the post. Here at DashDevs, my team and I have personally been involved in including ACH and wire transfers as payment options in neobanks, as well as other fintech products. Such projects naturally necessitate integrating a banking API from an external partner who has support for ACH and wire transfers. Here’s an overview of popular providers we have worked with:

ACH transfer providers:

#1 Dwolla Dwolla is a payment platform focused exclusively on ACH transfers, offering seamless bank-to-bank transactions for businesses without supporting wire transfers. Ideal for recurring payments, payouts, and bulk transfers.

• Provides ACH payment processing exclusively, no wire transfers.
• Supports bulk transfers and real-time payment updates.
• Offers customizable API for smooth integration into business workflows.

#2 PayPal PayPal is a global payments company that facilitates ACH transfers through linked bank accounts, offering secure, quick online payments and transactions for individuals and businesses.

• ACH transfers through linked bank accounts for quick, secure payments.
• Integrates with online marketplaces and e-commerce platforms.
• User-friendly interface for managing personal and business payments.

#3 Plaid Plaid is an American financial services company that connects bank accounts to financial apps, securely enabling ACH payments and financial data sharing for popular platforms like Venmo and Robinhood.

• Facilitates secure ACH transfers by linking bank accounts with financial apps.
• Powers popular payment platforms like Venmo and Robinhood.
• Ensures secure data sharing and real-time bank verification.

Wire transfer providers:

Western Union Western Union is a financial services company specializing in fast domestic and international wire transfers with options for both online and in-person transactions.

• Fast domestic and international wire transfers with same-day service.
• Global reach with over 500,000 agent locations worldwide.
• Online and in-person transfer options for flexibility.

Wise (formerly TransferWise) Wise is an international payment service provider offering low-cost international wire transfers using real exchange rates. It’s ideal for cross-border transactions with transparent pricing.

• Low-cost international wire transfers using real exchange rates.
• Transparent, no-hidden-fee structure for global money transfers.
• Multi-currency account options for managing funds across borders.

Revolut Revolut is a fintech company providing international wire transfers, multi-currency accounts, and low-fee financial services for individuals and businesses worldwide.

• Supports international wire transfers with competitive fees.
• Multi-currency accounts allowing easy global money management.
• Real-time currency exchange at interbank rates for cross-border payments.

Surely, the range of vendors supporting one or another payment method is much broader. Yet, most likely, you will stick to one of the mentioned providers. 

Final Take

ACH vs wire transfers choice ultimately depends on your business needs. ACH transfers are ideal for low-cost, recurring payments like payroll, while wire transfers excel in handling high-value, urgent transactions. Both methods have their advantages, and many businesses benefit from using or offering both simultaneously.

Here at DashDevs, we specialize in integrating ACH, wire transfers, and other payment methods into fintech and non-fintech products. Reach out to us for expert guidance on implementing the best solution for your business. With more than 14 years of experience and 500+ projects under our belt, we can offer you expert guidance as well as the implementation of the best solution for your business. 

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