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MAG Sponsor Spotlight: Direct Debit: The Credit Card / ACH Hybrid (MAG Quarterly- Volume Four, Issue One)

By Kaz Nejatian, KASH 

March 3, 2016

The majority of merchants assume that in the fight against increasing card acceptance costs, they have no good options.  Many merchants hope they can achieve incremental reductions to their acceptance costs, but they have been lead to believe that interchange is a fact of life.  After all, merchants are told that their options are either to accept cards or lose sales.  This may be the least true fact that everyone believes. 

25% Reduction in Interchange  

In December 2015, Power Ride Outlet, one of the largest retailers in the power sports industry, moved 25% of its customers away from credit cards and onto an interchange free payment method. A 25% reduction in card acceptance costs without changing their card processor, their hardware, or checkout time. And that’s just on the first checkout. 

Up until recently, the assumption was that merchants could only accept two forms of non-cash payment. First, they could accept credit (and debit) cards. These would allow for expensive but fast, broadly available, and relatively easy payments. Second, they could accept ACH – which was inexpensive, but slow (with 3-5 day clearance and up to a 90 day settlement window) and difficult.  How many customers could actually remember their checking account number or routing number at point of sale? 

In 2015, the advances in computing power and algorithmic technology changed this.  Merchants can now accept a third method of payment. Direct debit, powered by ACH but with the clearance speed and ease of credit cards, allows merchants to accept payments online or at point of sale with a cost that is frequently 80% less than traditional credit cards.  

Kash ( is the first company to offer Direct Debit transactions in the US.  

With Direct Debit, customers (online or in person) can pay directly from their bank accounts without going through the card networks.

How does Direct Debit work?  

Direct Debit is a hybrid between credit card and ACH networks.  Like credit cards, Direct Debit clears instantly (average of less than 1.9 seconds), settles the next business day, and is ubiquitous among consumers with nearly 90% of US banked customers pre-registered.  Most importantly, like ACH, Direct Debit is affordable – allowing merchants to collection payments at 50 bps.

 At Kash, we have a proprietary algorithm that makes ACH live (we underwrite the risk of any delay or chargeback) and a proprietary software that allows us to clear any transaction without requiring the customer to know their bank account number. Online, the customers simply checkout with their online banking username, and in person, the customers can checkout and pay using existing merchant loyalty cards or mobile apps.  

About Kash 

Kash is a payment company with offices in San Francisco and Waterloo. Kash’s team includes Joe Saunders, the former CEO of Visa, and payment professionals from Morgan Stanley, OANDA, and Microsoft. Kash investors include Y Combinator, Green Visor, Draper Associates, and the founders or presidents of AliPay, Reddit, FriendFeed, and