Almost every software company that offers payments supports bank transfers (ACH, Pay by Bank) alongside credit and debit cards and popular wallets like Apple Pay and Google Pay.
The problem is we use the same word, “payments,” to describe two fundamentally different mechanisms. And those differences introduce serious, often unmanaged risk to software companies.
How Card Payments Actually Work
When a consumer pays for a good or service through your software using a credit or debit card, we authorize that transaction through a network like Visa, Mastercard, and so on. That authorization process does something critical: it asks the card-issuing bank, in real time, whether it will honor the transaction. The bank doesn’t just answer. It places a hold on the funds so they can be collected.
Every participant is de-risked in that moment. The consumer knows they had the funds. The merchant has a high degree of confidence they’ll be paid. And everyone in the middle, including us, can get to work.
ACH Has No Authorization Step
In the world of bank payments, there is no authorization.
Let that sink in.
Yes, the consumer logged into their bank account to permit a transfer, or entered their account credentials into a secure form. But there is no guarantee those funds will move, and no hold is placed on them. That same consumer could spend the money somewhere else five minutes later.
Here’s what makes it worse: ACH payments move on trust. Bank A asks Bank B for money. Bank B transfers it, knowing it can reverse the transfer, without explanation, for a window of time afterward. If you’ve already moved those funds to your customer and Bank A requests them back, someone is left holding the bag. Often, that’s you or your customer.
Next-Day ACH Settlement Sounds Great. Here’s the Catch.
We regularly meet software leaders who say their payments offering won’t be competitive without next-day ACH settlement. Forward supports this. We do it for thousands of customers, but we walk each of them through the risk profile before they decide.
For some industries, next-day settlement is reasonable. If your software helps constituents pay property taxes or utility bills to a government entity, a reversal is a manageable problem. The government has other tools to compel payment.
But consider the opposite end of the spectrum. If your software helps artists sell paintings, next-day ACH settlement is genuinely dangerous. A bad actor uses a fraudulent bank account to purchase a painting, receives it, reverses the payment, and now the artist or the software company absorbs the loss.
The industry you serve, and the nature of your customers’ transactions, should drive that decision. There’s no universal right answer.
What Software Companies Often Don’t Know
Everyone understands that software companies can monetize payments. What’s less visible is what lies beneath the surface: a need for genuine fluency in how the financial system actually works.
The risk profile of ACH is not a reason to avoid bank payments. It’s a reason to approach them with the right expertise and guardrails in place.
Forward’s Maximize program helps software companies do exactly that. Not just with the technology to process payments, but with the operational knowledge to manage risk, structure settlement windows appropriately, and make decisions that protect both the platform and its customers.
Want to understand how bank payment risk applies to your platform? Talk to our team.
