ACH PAYMENT PROCESSING

Ever heard of this term ACH? Well, it stands for AUTOMATED CLEARING HOUSE. It is also known as direct payments. Now you must be thinking what this means and how it is related to our daily lives. Example if you pay your bills electronically instead of writing a check or entering a credit card number or receive a direct deposit from your employer the ACH network is probably at work. Whenever we process any financial transaction it has to go through the ACH of that country.

ACH payments are a way to transfer money bank-bank without using credit card networks, paper checks, credit card networks, wire transfers or cash. It is a two way process where there is a originator and a receiver. Correspondingly their respective banks will be called as ORIGINATING DEPOSITORY FINANCIAL INSTITUTION (ODFI) and the RECEIVING DEPOSITORY FINANCIAL INSTITUTION (RDFI).

Applicable account                                                                             Checking and Savings account only

Areas of operation                                                                                U.S. and Puerto Rico

Governing body                                                                                               NACHA

Typical processing times                                              Funds became available between 3-5business days

There are two types of ACH

• Direct Deposit Payroll- Companies push money to their employee’s bank account on designated pay periods.
• Recurring Bill Payments- When consumer pay business example: mortgage lender, Insurance Corporation. At certain interval may choose to sign up for recurring payments.

The ACH transfers are usually very quickly often free and can be more users friendly. Than writing a check and paying a bill with a credit or debit card.

PROCEDURE OF AN ACH

• An Originator initiates the process, either a Direct Deposit or Direct Payment transaction using the ACH Network.
• These ACH entries are entered and transmitted electronically.
• These ACH entries are entered and transmitted electronically, making transactions quicker, safer and easier.
• ACH entry at the request of the Originator is entered at the Originating Depository Financial institution.
• Later, the ODFI aggregates payments from customers and transmits them in batches at regular, predetermined intervals to an ACH Operator.
• ACH Operators receive batches of ACH Payment Processing entries from the ODFI.
• Finally the receiver’s account is debited or credited by the RDFI, according to the type of ACH entry.