Automated Clearing House (ACH)

Reaching out to the US

Automated Clearing House (ACH) is an electronic payment and transfer system in the United States which connects US financial institutions. It primarily provides a platform for the clearing of credit and debit transactions between banks and for information sharing amongst its participants. A total of 20.2 billion payments with a total value of approximately $33.91 trillion were transacted through ACH in 2011, which included typical payments such as payroll, Social Security benefits and bill payments.

Both the government and commercial sectors have begun utilizing ACH for their payment transactions, with businesses in the US preferring consumers to use ACH services rather than using credit or debit cards.

More and more companies have taken a liking to the ACH method of payment as its flexibility allows acceptance of payments from various methods including the phone, WEB, or recurring billing. It also saves consumers time, reduces collection calls, and operates in generally quick fashion, thus reducing the number of late payments. ACH excels in reducing hassle for both payer and payee and eliminates the cost and time for handing paper cheques.

ACH was formed when the Federal Reserve decided to utilize computer systems as a means to efficiently clear overwhelming amounts of paper-based payments in the early 1970s. The National ACH Association (NACHA) coordinates the establishment and is responsible for writing the rules and standard regulations pertaining to the ACH system.

How ACH works:
Within the system, any merchant, company, or organization receiving payments are called Originators, and an official ACH transaction begins when a Receiver (the customer/payer) authorizes an Originator to issue an ACH debit or credit to an account. Upon authorization, the Originator typically receives a written, verbal, or electronic verification from the Receiver, which then allows the Originator to submit an ACH entry which will eventually be transmitted to a Receiving Depository Financial Institution, where the Receiver’s account is charged a credit or debit.

Gaining access to ACH services is simple, with companies, such as AWEpay, specializing in ACH payments able to provide either an online or software solution payment platform. Such companies will usually study the nature of the applicant’s business beforehand to ensure a standard underwriting is performed prior to offering the service.

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