How ACH Increases Your Profits

How ACH Increases Your Profits

More Ways to Pay = More Sales

Automated Clearing House, or ACH payment processing, is one of the oldest, most reliable forms of electronic funds transfer.   

The last decade has seen ACH transactions soar, due to the advent of web-based ecommerce and consumer preferences for paying bills online.

ACH payments produce a bottom-line impact by generating new revenues and reducing payment processing expenses.   ACH echecks are the most popular alternative payment method for US shoppers.  

Accept checks online.  Accept check by phone, mail & fax orders.  Give your customers another way to pay you.  

One Time or Recurring Payments for Billers

ACH Payment Processing
ACH Payment Processing

ACH transactions are popular for online bill pay.  Any company that bills customers should have a website that enables customers to make payments.

ACH payments are particularly effective for recurring billing.  Utility bills, car payments, insurance, health clubs, propriety management, internet services, and an array of other types of billers have long benefited from stabilized cash flows that result from using ACH recurring payments.

Interested in increasing your profits with ACH?  

Contact today.

International ACH Slow to Catch On

Reasons International ACH Transactions are Lagging

Two years after the passage of the International ACH Transaction (IAT) code, most businesses are not using the service due to three main reasons:

  • Complying with the IAT rules is an added expense.  These days, businesses are focused on decreasing costs.
  • IAT requires companies to implement technology and process changes in order to conform with file format and data transmission standards.
  • Banks have been slow to modify systems and procedures for IAT transactions so companies have little guidance for implementation.

According to NACHA, IAT ACH transactions increased 520% to 9.53 million from 1.54 million transactions in Q3 from the same period in the prior year.

History of International ACH

NACHA, the electronic payments association governing ACH standards in the US, amended its operating rules to include IAT in September, 2009.  From that point, international payments made through the ACH network had to be identified as IAT transactions. 

This change affected all parties in the payments hierarchy, including corporate treasuries, financial institutions, third-party financial software vendors, and payment service providers.

According to a survey conducted by Logica, most US companies are not ready to send or receive IAT – only 36% are live, 14% are in the implementation stage, 39% have a business case in development and 11% are in the review or selection process of technology providers.

International ACH Regulators

Under the NACHA regulations, IAT entries are subject to the US Department of Treasury Office of Foreign Assets Control (OFAC) screening. NACHA implemented the rules in response to OFAC and anti-money laundering (AML) issues associated with previously-used codes which were unable to be checked against the OFAC Specifically Designated Nationals list (SDN).

The goal of the IAT rule change was to be sure that US organizations were not doing business with blocked entities or banned countries.

IAT payments must include specific data elements defined by the Bank Secrecy Act ’s (BSA) Travel Rule.  The file format must include a detailed record and at least seven addenda records needed for compliance with the BSA Travel Rule. 

These include information about the originator, receiver, beneficiary, and all domestic and foreign banks involved in a transaction. The format is similar to data requirements for wire transactions and are compatible with global formats such as SWIFT and ISO 20022.

Penalties Associated with Non-Compliance

There are civil and criminal penalties associated with non-compliance to IAT rules.  These include jail sentences and fines ranging from $10,000 to $10,000,000 per occurrence by OFAC.  Fines up to $500,000 per month in NACHA rule violations can also be imposed.

It’s often complex to determine whether a transaction is domestic or international.   Whether a transaction is considered an IAT or a domestic transaction is based on the location of the financial institution involved in the processing and settlement of the transaction as well as the location and status of the final beneficiary.


International ACH transfers, while slow to take off, are sure to grow over the coming years.  Regulatory compliance has been one of the main reasons for the laggard growth.

The regulations that govern international ACH transactions are becoming wide-spread across the entire banking sector. AML and OFAC regulations have decreased financial institutions’ tolerance for risk. Regulatory compliance, especially as it relates to international money transfer, is not going away anytime soon.  

Still, there are some companies that may benefit from the effort required to process international ACH transactions. It’s always worthwhile to investigate all of your options.

Are you interested in exploring international ACH for your business?

Contact today


ACH Payments on the Rise

ffaab3a6-6cd7-4b14-9ac2-7922cf2f2a70 The growth of ACH payments for electronic bill payment continues.  As paper check writing declines, ACH payments are on the rise.

NACHA released its report for Q4 2011 ACH transactions.  WEB entry classifications for online bill payments rose 6.9% to 685.9 million transactions, compared to 641.5 million for the same quarter of 2010.  WEB transactions are usually payments from biller websites or made through a third party processor.

Consumer entry bill pay (CIE) increased 11.2%, with growth to 40.6 million transctions compared to 36.5 million for the previous year.  CIEs are credit transactions made through an online banking portal.  CIEs include Secure Vault Payments and EBIDS bill payment services.  EBIDS generated 19 million new ACH transactions in 2011.  EBIDS was launched commercially in February of 2011.

Secure Vault Payments, a payment method that allows consumers to “push” payments to merchants through online banking sites, continues to add new bank partners.  About 40 banks offer Secure Vault Payments now, including Regions Financial Corp, U.S. Bancorp, PNC Financial Services Group Inc., Union Bank of California, and many other smaller regional banks.

Secure Vault should be adding more banks to the platform later this year.  eWise, the technology operator for the switch, is enhancing the platform to make it easier for banks to participate without the need for the banks to pay for developmental and operational expenses

WEB and CIE codes are projected to grow to  3 billion yearly.  At the same time, accounts receivable conversion (ARC) transactions, which convert paper checks to electronic transactions, continues to shrink.  ARC transactions slid 9.7% to 484.8 million transactions compared to 536.8 million in Q 4 2010.

Telephone (TEL) transactions increased slightly with gains of 0.7% in Q 4 211.  There were 92.9 million TEL transactions compared to 92.3 million the previous year.

Back-office conversion (BOC) volume grew 7.6% to 55.1 million transactions compared to 51.2 million in Q4 2010.  Point of purchase (POP) classifications dropped 7.6% to 126.9  million transactions form 137.4 million the year before.  The drop in POP indicates that fewer consumers are writing checks to pay for retail purchases.


Speeding up ACH Processing

Same Day Settlements Approved Yet Few Banks Participate

Federal Reserve same day settlement for ACH transactions has been available for over a year.  However, very few banks have chosen to participate, making it extremely difficult for merchants to take advantage of quicker clearing of ACH payments.

The Electronics Payments Association, the governing body for for ACH payments, is now creating a new system for faster payment processing.  The proposed Expedited Processing and Settlement system (EPS) will go into effect on March 15, 2013, if it is approved by the members of the association. Approval will require the affirmative votes of two-thirds of the membership.

Banks Need to Jump Onboard

It’s obvious that banks and the ACH network must do something to speed up clearing of transactions.  We live in a real time world.  In order to stay competitive, the ACH system must find a way to modernize itself.

Banks no longer have the luxury of processing at their leisure.  Banks have to realize that paper checks are not the competition for electronic funds transfer.

Other methods of accepting payments are already significantly faster than ACH.  And allow merchants to ship goods without waiting a to be sure a check clears.


Banks are facing new competition from new systems that give consumers and merchants’ ways to accept payments quickly and without unnecessary risk.  EPS is a step in the right direction.  It will force banks to step up to the plate and provide real-time payment processing for those of us that live in the real world.

Interested in how ACH payments can help you increase sales & profits?

Contact today


ACH Electronic Funds Transfer

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?

Contact today

What is the ACH EFT Network?

Electronic Funds Transfer ACH Network

Electronic funds transfer (EFT) systems such as the ACH network, allow payments to be automatically debited and credited between bank accounts. ACH stands for Automated Clearing House. 

Since it began operations in the early 1970s the ACH network has been an electronic funds transfer (EFT) network used by individuals, businesses, financial institutions and government organizations.  

The ACH network is a batch-oriented electronic funds transfer system governed by the NACHA Operating Rules which provide for interbank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH credits and ACH debits.

ACH Network and Financial Institutions

The ACH network functions from beginning to end through a series of implied or explicit agreements with all participating Depository Financial Institutions (DFI) which agree to comply with the NACHA Operating Rules.  Inherent to this agreement is the DFI’s responsibility to assure that its customers follow procedures that complement the safety, soundness, and efficient functioning of the ACH Network.

Through the ACH Network, funds are electronically credited or debited to a company’s or individual’s deposit account.  These deposit accounts include checking, savings, loan and financial institution general ledger accounts.  Both funds and information may be exchanged between financial institutions on behalf of companies and individuals utilizing electronic payments, therefore providing better cash management capabilities. 

Every ACH transaction is traceable. It is probably the one system in the country where not a dime has been misplaced and not found.

ACH transactions are transmitted with the following information: the account holder name, financial institution routing and account numbers, party initiating the transaction and the amount and date of the transaction.  Additional payment information may be sent with an ACH payment by using extended record formats called addenda.  Addenda may include accounting related information such as an invoice number or a shipping advice.

For more information on ACH processing, contact