Global ACH (also called International ACH Transfer) is a method for moving money from US-domiciled accounts across borders using local rails. In technical terms, Global ACH operates much like ACH in the US, with the exception that can be settled in local currency using local bank accounts.
Global ACH runs across rails including EFT in Canada, SEPA in Europe, BACS in the UK, and BECS in Australia. A relatively new option for moving funds, Global ACH has gained traction as a cost-saving alternative to SWIFT, FX providers, and third-party service providers.
Global ACH is also less time- and resource-consuming than establishing individual bank accounts abroad. While necessary for some companies, this method for moving money across borders is challenging to scale. To set up a bank account in every country where your business needs to send money would require underwriting and compliance (as well as ongoing maintenance) in each region for each individual international account.
Primary Benefits of Global ACH
Global ACH offers business benefits to both teams building new global products that move money and companies looking to streamline their existing cross-border payment flows. Here are advantages to consider:
- Global ACH is less expensive. Depending on your bank partner, Global ACH is five to seven times cheaper than SWIFT, on average. It is also much less expensive than FX providers and third-party service providers.
- Full visibility on what payees will receive with no lifting/correspondent fees. Payees know exactly how much they’ll receive with Global ACH when payments are initiated in USD and settled in local currency.
- No global compliance requirement. Because businesses initiate Global ACH using their US-domiciled account, they only need to complete underwriting at their domestic financial institution. After that, cross-border compliance and security is managed by the bank.
Like any payment method, Global ACH has both upsides and limitations. Potential adopters should also know that Global ACH is credit (or push) only. Payments settle more slowly than they will with SWIFT, and there are limitations to coverage and support for Global ACH.
How To Send Money via Global ACH
Let’s walk through an example of how a company would send a Global ACH payment via Modern Treasury using a partner like SVB or JP Morgan. Say Margo Milliner, a marketplace for women’s hats, needs to pay one of its marketplace vendors in Italy. Note: Italy is one of 36 countries with SEPA coverage.
- Margo Milliner will use Modern Treasury to create a payment order for their vendor in Italy.
- They’ll be able to review the current exchange rate between dollars and euros before the transaction is sent. This way, Margo Milliner knows exactly how much money they are sending in USD and exactly how much their vendor will receive in EUR.
- Once initiated, Margo Milliner is able to track and reconcile the payment just like any other transaction—though the payment itself will be sent from Margo Milliner’s domestic bank through the ACH Network to SEPA.
Global ACH vs. SWIFT
Compared to Global ACH, SWIFT is a better-known and more widely-utilized rail for moving money overseas. Formed in 1973, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a network for sending and receiving international wire transfers. Including 11,000 member financial institutions, SWIFT is available in 200 countries and territories. The SWIFT network does not transfer physical funds—instead, the network provides a standard way to send payment orders using SWIFT codes.
Whether to choose Global ACH vs. SWIFT will depend on your needs and requirements, since each rail has pros and cons. Global ACH is generally much less expensive but takes longer to settle (2-4 days as opposed to 1-2 days for SWIFT). Although SWIFT recipients will get their money faster, they’ll likely lose a cut to lifting or correspondent fees. Your choice will also depend on whether your payment is a credit (push) payment or debit (pull)—Global ACH is push only. Lastly, you’ll want to consider reversibility (SWIFT cannot be reversed) and check coverage (as a newer rail, Global ACH is not available everywhere).
Global ACH vs. International ACH Transaction
Although the names are similar, Global ACH and International ACH Transaction (IAT) do not mean the same thing.
An International ACH Transaction refers to the IAT SEC code found in domestic ACH payments. This code is used for money being sent domestically between two US financial institutions with the final destination for the payment being cross-border. SEC codes signal that extra information is available about an ACH transaction—an IAT code signifies that a payment transaction will eventually involve an overseas party. This article digs deeper into IAT.
Global ACH is, however, synonymous with International ACH Transfer.
One other item of note: Global ACH is not the same as FedGlobal ACH. Whereas the domestic portion of a Global ACH transaction is overseen by Nacha, FedGlobal ACH is administered by the Federal Reserve.
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