International ACH transfers explained

Individuals and businesses in the United States are familiar with using the ACH network to electronically transfer funds within the country. Many paychecks, bills and online payments in the US are settled using ACH. However, not everyone is aware that ACH can also be used for international payments.

In this article we’ll examine how international ACH transfers work, assess some of the network’s strengths and limitations, and look at how it stacks up alongside alternative methods of international money transfer.

What does ACH stand for?

ACH stands for “automated clearing house.” This phrase can be used generically: BACS in the UK, BECS in Australia and eGIRO in Singapore are examples of automated clearing houses. An ACH is an electronic network for processing financial transactions, primarily but not exclusively within one country or region. That makes ACHs different from the SWIFT network, which was designed to be global.

A little confusingly, the acronym ACH is also used to refer to the specific national automated clearing house in the United States, which we’ll focus on in this blog post. The US ACH network was established in the 1970s and processes financial transactions for consumers, businesses and local, federal and state branches of government. It was originally devised to help speed up payroll transactions.

How do ACH payments work?

When making an ACH payment, the payer will instruct the bank to make a transfer, but the payment is not instant. It will be held until it is processed in a batch with other payments. This system is more time-efficient for banks, but can take a little longer for customers than alternative systems that aren’t batched in this way.

The rules and regulations that govern the ACH network are established by the National Automated Clearinghouse Association (Nacha). Nacha has also been enabling international payments with ACH for more than a decade; 122 million of these took place in 2023, with a total dollar value of $248 billion. In contrast, the total value of dollars transferred using the ACH network as a whole in 2023 was $80 trillion. Global ACH payments are a small but growing part of this overall total, almost tripling in value since 2014.

If you are a US citizen, ask your bank whether it will enable an ACH transfer to the destination country you have in mind, as some countries may not be covered and not all banks offer this service.

How do you make an international ACH transfer?

There may be some variation to these steps depending on the country to which you are transferring the funds, but here’s a guide to the typical process:

• Find out your recipient’s local bank details, including their full name as it appears on their bank account and their bank account number. You’ll also need their address and a code that will help identify their bank branch. This may have different names in different countries, for example: a routing number, sort code or transit number.

• Fill out all transaction details on your online or mobile banking system, or in a bank branch or over the phone if that’s how you bank. You may be able to add a message for the recipient or add an email address so they can receive a notification about the transaction.

• The transfer is processed together with additional transfers by the bank in batches, which take place at set times throughout the day.

It’s also possible for transfers of funds through the ACH system to be automated or recurring, for example when receiving pay or paying bills. An ACH direct deposit is the name given to electronic transfers made from a business or government entity to a consumer. A direct payment is the name given to electronic transfers used by individuals, businesses and other organisations to send money.

What is an international ACH transaction (IAT)?

When looking for information about international ACH transfers, you may come across the acronym IAT, which stands for international ACH transaction. Although these phrases are easily confused, they are not interchangeable. An IAT refers to the reporting requirement for banks and providers involved in sending money internationally. It’s not something you need to think about if you are a business or individual looking to send money abroad.

An international ACH transfer is also known as a global ACH. It’s a method of moving money from accounts based in the US across borders using local rails. Payments can be settled in local currency using local bank accounts.

ACH vs other payment methods

Fees for international ACH payments can vary depending on the bank and destination involved. They tend to cost more than a domestic ACH payment but are still cheaper than wire transfers. Most are processed within one to five working days. Rather than using the SWIFT network, global ACH uses rails including SEPA in Europe, BACS in the UK and BECS in Australia.

SWIFT

The most established alternative to ACH for an international payment is a wire transfer. This happens via the SWIFT network, and fees are taken by not only the sending and receiving bank, but also by any intermediary bank that the transaction passes through before reaching its destination. Wire transfers can take up to five days, but generally they are fast and secure, although a little more expensive.

Fintech platforms

In recent years, technological advances have made it possible to send money across borders via a number of payment platforms. Some of these come with steep fees and hidden currency conversion costs. Others may offer the interbank exchange rate and allow you to open multi-currency accounts with branch details in your recipient’s country. This allows you to send money internationally as quickly, cheaply and seamlessly as if it were a domestic transaction.

What are the pros and cons of international ACH transfers?

Transfer limits: Banks may cap transaction amounts for ACH transfers at a lower limit than alternatives. ACH is typically used for lower value, higher frequency payments.

Fees: International ACH transfers can be cheaper than wire transfers, but may still involve more fees than fintech platforms.

Timeliness: Fintech platforms may also be able to offer a faster cross-border transaction service than global ACH.

Availability: International ACH transfers may not be possible depending on the recipient’s country and the sender’s bank.

A better way to send payments internationally

Airwallex is a fintech platform that allows businesses and individuals to send money internationally in a way that’s quick, secure and cost-effective.

Airwallex leverages a wide array of local and global transfer options to make sure you get the fastest and most cost-effective solution. That’s why Airwallex can deliver transfers of over 60 currencies to over 150 countries and regions with payments received in as little as one business day with the full amount guaranteed.

With an Airwallex Global Account, you can access bank-beating FX rates and avoid hidden transaction fees. In addition, you can hold funds in multiple currencies, each in an account that operates as though you were a local of that country. This means you can collect payments from your international customers in their preferred currency and then spend those proceeds later in the same currency; for example, to pay global suppliers and employees. 

The costs and time involved in sending international payments can stack up and impact your bottom line, but now it’s possible to bypass the traditional systems and transfer money across borders in a smarter way. Find out more about Airwallex global transfers here or sign up for an Airwallex account today.