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ACH payment

Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit ACH payment transactions in batches. ACH credit transfers include direct deposit, payroll, and vendor payments. ACH debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills.

ACH payment operation

This is how the typical operation of an ACH payment system works:

  • Step 1: The ordering customer makes a transaction initiation, which can be either manually or by sending a file of initiation requests to a bank.
  • Step 2: The bank gathers all transaction initiations for an ACH payment that arrive from different customers.
  • Step 3: On a periodic basis, the bank creates a file that it dispatches to the ACH payment either at the end of day or in cycles throughout the day.
  • Step 4: The ACH payment operator combines the information submitted by the banks within each cycle.
  • Step 5: The ACH payment operator informs each bank of the net settlement amount for which they are responsible for the cycle.
  • Step 6: The ACH payment operator ensures that the settlement amounts are received from all participants for the cycle, so that the cycle can be executed.
  • Step 7: The ACH payment informs the destinator's bank of the transaction details.
  • Step 8: When a transaction arrives in the destination bank, the bank executes the transaction: such as crediting the payment to the beneficiary, while the ordering customer's bank debits the ordering customer's account.

ACH payment processing time

Per the guidelines set forth by NACHA, financial institutions can choose to have ACH credits processed and delivered either within the same day or in 1 - 2 business days.

The transfer times are established by NACHA (National Automated Clearing House Association - which manages the administration, development, and governance of the ACH payment network), and processing only occurs on banking business days. The receiving bank may also decide to hold the funds for a day or more, which means even though ACH payment processing is complete, it can still take a little time before the funds become available.

Understanding ACH payment processing time can help your business plan its cash flow more accurately. That’s an especially important consideration for businesses that operate on very thin margins and any business with limited cash reserves.

Frequently Asked Questions

An ACH payment is a type of electronic bank-to-bank payment in the US. Bank-to-bank transfer is made via the ACH payment network, rather than going through the card networks such as Visa or MasterCard. An ACH payment is also referred to as an ACH transfer or ACH transaction.

There are 2 main categories of ACH payments:

  • Direct deposits: deposit ACH payments from businesses or governments to employees or consumers.
  • Direct payments: the use of funds for making ACH payment either by organizations or individuals

ACH payment processing is an electronic network for bank transfer between the payer’s and the payee’s bank accounts through the Automated Clearing House network of U.S. financial institutions, regulated by NACHA (National Automated Clearing House Association), which manages the administration, development, and governance of the ACH payment network.

ACH payment processing processes large volumes of credit and debit transactions in batches. ACH payment processing is used for recurring payments and one-time payments instead of paper check, wire transfer, credit/debit card payment methods.

There are many uses for ACH payment processing. Some prime ACH payment processing examples include:

  • Businesses paying suppliers for products/services.
  • Recurring bill payments, like utility bills or rent.
  • Customer invoice payments.
  • Consumers moving funds from one bank to another.
  • Employers sending direct deposits to employees’ bank accounts.
  • Tax refunds and other government payments.
  • Online shopping.

ACH payment means electronic payments made from payer to payee bank account through the Automated Clearing House financial institution network overseen by NACHA (National Automated Clearing House Association), which manages the administration, development, and governance of the ACH payment network.

ACH payment processing is a cost-effective and easy method for both consumers and businesses. Consumers use ACH payments to pay bills online, mortgage payments, and other types of loan repayments. Businesses use ACH payments to pay both their employees by ACH direct deposit, and pay their vendors or suppliers.

ACH payment costs less than other payment solutions, including paper checks, wire transfers, debit cards, or credit card transactions.

ACH payment method is a type of electronic funds transfer (EFT). ACH payment method is a cost-effective method for making business and personal payments electronically.

You can start by inquiring with your existing service provider if they can enable ACH payment method. This process would include:

  • The vendor or merchant services provider that already processes credit card payments.
  • The bank where the business accounts are kept.
  • Any accounting software provider.

Businesses can maximize profitability and elevate the customer experience with a platform that includes real-time error checking and ACH payment visibility reports. You can originate commercial ACH payment payments, receive tax refunds, or send out direct deposits, all from a single, universal dashboard.

ACH fees are inexpensive. ACH fee for ACH payment processing cost less than other payment options, including paper checks, wire transfers, credit cards, and debit cards.

Companies of all sizes, including small businesses, should use ACH payment processing and accept ACH payments from customers, because it’s easy to use and costs less than other payment methods. A small business can save and improve cash flow through a merchant account used in online ACH payment processing.

The ACH network exists as a financial hub and helps people and companies move money from one bank account to another.

There are various ACH networks around the world. ACH networks mainly operate in:

Country System
 Albania AECH
 Argentina COELSA (Compensadora Electrónica)
 Australia Bulk Electronic Clearing System (BECS)
 Austria Payment Services Austria GmbH (PSA)
 Bahamas Bahamas Automated Clearing House (BACH)
 Bangladesh Bangladesh Automated Clearing House (BACH)
 Belgium Centre for Exchange and Clearing (CEC)
 Brazil CIP-SILOC
 Bulgaria BISERA
 Canada Retail System, known formally as the Automated Clearing Settlement System (ACSS), run by Payments Canada
 Cayman Islands Cayman Islands Automated Clearing House
 Chile Centro de Compensación Automatizado (CCA)
 China China National Advanced Payment System (CNAPS) Bulk Electronic Payment System (BEPS)
 Colombia ACH-Colombia and
CENIT
 Costa Rica SINPE (Spanish: Sistema Nacional de Pagos Electrónicos; National System of Electronic Payments)
 Croatia Financial Agency (FINA)
 the Czech Republic CERTIS (Czech Express Real Time Interbank Gross Settlement System)
 Denmark Eurogiro and
Nets Group
 Egypt EG-ACH
 Ethiopia EthSwitch
 Europe a pan-European automated clearing house for the Single Euro Payments Area, STEP2
 France STET
 Germany Deutsche Bundesbank
 Greece DIAS Interbanking Systems
 Hungary InterGIRO2 GIRO Zrt
 Hong Kong Interbank Clearing Limited
 India National Automated Clearing House and
National Electronic Funds Transfer
 Iran PAYA system (Paayaa, پایا)
 Israel Masav
 Italy Banca d'Italia,
Nexi and
SIA
 Japan Zengin (banking)
 Latvia Latvijas Banka
 Mexico SICAM (Sistema de Camaras)
 Morocco GSIMT (The Moroccan Interbank Remote Clearing System)
 Moldova National Bank of Moldova
 Netherlands/ Germany/ Italy equensWorldline
 Nigeria Nigeria Automated Clearing System (NACS)
 Norway Norwegian Interbank Clearing System (NICS)
 Pakistan National Institutional Facilitation Technologies (NIFT) ACH
 Philippines PesoNet
 Poland Krajowa Izba Rozliczeniowa (KIR)
 Portugal Sociedade Interbancária de Serviços (SIBS)
 Peru Camara de Compensacion Electronica (CCE)
 Republic of Macedonia Clearing House KIBS AD Skopje (KIBS)
 Romania TransFonD SENT ACH
 Saudi Arabia SARIE with both RTGS and ACH
 Singapore eGIRO which is part of Singapore Automated Clearing House
 Slovenia Bankart
 South Africa BankservAfrica
 South Korea HOFINET
 Spain Iberpay
 Sweden Bankgirocentralen BGC AB
  Switzerland Swiss Interbank Clearing
 Taiwan Taiwan Clearing House
 Ukraine National Bank of Ukraine's System of Electronic Payments
 United Kingdom Bacs Payment Schemes Limited
 United States Federal Reserve Bank's FedACH and
The Clearing House's Electronic Payments Network, underpinned by NACHA's ACH Network
 Venezuela Cámera de Compensación Electrónica (CCE)

There are a variety of benefits to this hassle-free payment method:

  • Cost savings.
  • Easy to manage.
  • Speed and efficiency.
  • Convenience and accuracy.
  • Lower costs and improved cash flow.
  • Security and fraud protection.

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