Posted by NationalACH on Mar 16, 2012
ACH, ACH processor, ACH processing, ACH payments,

ACH Processing for Electronic Funds Transfer

ACH payments and wire transfers are the most commonly used methods of transferring funds electronically within the United States.

Wire transfers are best suited for high dollar transfers must which must be sent or received quickly, within the same day or by next banking day. ACH payment processing is best method for transmitting high volumes of lower value electronic funds transfers.

Instead of sending transactions separately, ACH payments are batched together in a file to be cleared through the Federal Reserve. ACH processing is much less expensive than wire transfers.

The ACH network is not a real time system.  Files are cleared through the Federal Reserve at midnight of the day following file submission.  Merchants that ship goods are well-advised to wait until the transaction is cleared to mitigate the risk of returns for non-sufficient funds.

Participants in the ACH  Network

There are 5 participants in the ACH network.

1)  Originator

An Originator is a person or entity that initiates the ACH payments Originators are a companies or individuals that direct a transfer of funds to or from consumers’ or companies’ accounts.

2)  Originating Depository Financial Institution (ODFI)

An ODFI is a financial institution that receives payment instructions from Originators and forwards the entries to the ACH network.

ODFI responsibilities include:

  • Authorization of all entries
  • Transmitting the entries to the ACH Network in a timely manner
  • Terminating the origination of entries if required
  • Keeping data and personal information secure
  • Ensuring that the entries contain the appropriate information and information is accurate
  • Complying with audit and rules requirements as defined by National Automated Clearing House Association (NACHA)

3)  Automated Clearing House Operator

An ACH Operator is a central clearing facility to or from which participating financial institutions send or receive ACH entries.

4)  Receiving Depository Financial Institution (RDFI)

A RDFI is a participating financial institution which receives entries for debit or credit to the accounts of its customers as Receivers.

An RDFI’s responsibilities include the following in regard to receipt of ACH files:

  • Receipt and validation of ACH entries
  • Timely posting to Receivers’ accounts
  • Validation of pre-notifications
  • Timely return of entries and pre-notifications not posted
  • Notifying Originators of incorrect information on accepted entries
  • Timely handling of remittance data as required by NACHA ACH Operating Rules

5)  Receiver

A Receiver is an individual or an organization which authorized an Originator to initiate an ACH entry to the Receiver's account with the RDFI.

ACH payments are a safe, secure, and inexpensive method for sending and receiving money.


ACH credits give you the ability to direct deposit funds to bank accounts. ACH debits automatically deduct funds from consumer or business bank accounts. The funds are then electronically deposited to your bank account.  

The ACH network is one of the oldest and most secure methods for electronic funds transfer in the world. Millions of US business and consumers regularly use the ACH network to send and receive money.

Interested in establishing an ACH processing account?

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