Direct debit is a popular low-cost alternative to card payments in the US, but each solution carries different levels of risk. Merchants should carefully balance cost efficiency with fraud exposure and settlement certainty.

• ACH Direct Debit allows US shoppers to pay from their bank accounts, but it operates on delayed settlement with no real-time validation. This creates financial risk for merchants, as invalid or fraudulent payments can be paid out and later reversed.

• Pay by Bank (US), powered by Plaid, uses the same ACH rails but adds secure account linking, real-time validation, and balance checks. This reduces fraud, lowers rejection rates, and improves the customer experience. While slightly more expensive, it provides a safer and more reliable alternative for merchants processing significant ACH volumes.

ACH (Automated Clearing House)

ACH Direct Debit lets shoppers in the US pay directly from their bank accounts. It uses the ACH network, a batch-based system run by US banks.

How it works

• The shopper provides routing and account numbers.

• Sana Pay initiates a debit request via the ACH network.

• The merchant receives funds after settlement.

Key characteristics

• Settlement delay: Funds may be credited to the merchant before final confirmation.

• Risk of returns: Banks can reject payments days later for reasons such as insufficient funds or invalid account numbers.

• No built-in validation: There’s no real-time check on whether the account is valid.

• Fraud exposure: Fake or invalid account details can initially be processed and even paid out before later being reversed.

Recommendation

While ACH is attractive for its very low cost, it carries high financial risk due to delayed settlement and the absence of proactive account validation. To manage this risk, we recommend the following:

• Restrict usage to trusted customers: Use ACH primarily with long-term, reliable buyers where the likelihood of fraud or insufficient funds is low.

• Enable a T+5 payout delay for high-volume ACH: This ensures that most returns or chargebacks are identified before funds are released, reducing exposure to negative balances.

Pay by Bank (US)

Pay by Bank (US) is an ACH-based payment method enhanced by Plaid. Instead of shoppers typing in account details, they securely connect to their bank accounts using online banking credentials.

How it works

• Shopper selects their bank and logs in securely.

• Plaid verifies account ownership, retrieves account details, and checks the balance.

• Sana Pay processes the payment through ACH rails with enriched data.

Key characteristics

• Real-time validation: Account ownership, identity, and balance are checked at the time of payment.

• Reduced failures: Fewer rejected or returned transactions due to insufficient funds or fake details.

• Improved fraud defense: Identity data and secure login help mitigate account takeover and fraudulent use.

Recommendation

Pay by Bank (US) leverages Plaid to provide real-time account validation and balance checks, reducing fraud and failed payments compared to standard ACH. To maximize its value, we recommend the following:

• Use for high-volume ACH processing
  Pay by Bank is especially suited for merchants handling large transaction volumes where fraud and return risk must be minimized.

• Offer as a default option for new customers
  Since account validation happens during the first transaction, Pay by Bank provides safer onboarding than raw ACH.

• Balance cost against risk reduction
  Transaction fees are higher than standard ACH, but the lower fraud exposure and reduced operational overhead justify the investment for most merchants.

Comparison

Feature	ACH (Direct Debit)	Pay by Bank (US)
Network	ACH	ACH (with Plaid)
Validation	None by default	Real-time account & balance validation
Settlement	Delayed; can be reversed days later	Same rails, but fewer reversals
Fraud Risk	High (fake or invalid accounts may pass initially)	Lower (account login + identity checks)
Customer UX	Enter routing + account number manually	Secure bank login via Plaid
Typical Costs	Lower processing fees	Slightly higher (Plaid validation fees)
Best for	Less risk-sensitive merchants	Risk-conscious merchants

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