| The Automated Clearing House (ACH) Network--a Panacea for Electronic Payments and e-Banking |
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| Security - Compliance/Privacy | |
| Written by Dan Forster | |
| Thursday, 26 July 2007 | |
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ACH can give any organization the ability to manage all transfers of funds electronically. The number of electronic banking payments originated by financial institutions in the U.S. increased to more than 8 billion in 2002, up more than 13 percent from 2001. These payments were valued at nearly $22 trillion. Including payments originated by the federal government, there were a total of nearly 9 billion such payments in 2002 worth more than $24 trillion. The numbers have continued to skyrocket since then.Until the 1990s, banking at the company level was heavily oriented to paper and the protection of check paper and other banking documents. The advent of electronic documents was embraced by the banking industry through the Electronic Payments Association that publishes the electronic banking payments standard for the United States (formerly called the National Automated Clearinghouse Association)—still called NACHA. It is a not-for-profit association that represents more than 11,000 financial institutions and 650 organizations through industry councils. NACHA develops rules and practices for the Automated Clearing House (ACH) Network and an array of electronic type payments. The ACH Network is a payments network that provides the capability to transfer funds to your company's own bank accounts, clients, vendors, and employees without the wait and hassle of traditional paperwork. In 2005, the number of checks converted to ACH debits increased by 60 percent and the ACH network processed more than 2.2 billion consumer bill payments. This electronic transfer of payment and deposit information permits tighter security over banking data and moves the money faster through the system. This has led to depositing receivables faster, paying payables on the exact date they are due, and getting employees paid directly into their personal or family checking accounts. What is ACH?
ACH is a nationwide central clearing facility that processes your electronic banking transactions. The software runs on most commercial computers. There are several ACH software products that run on the AS/400/iSeries/System i, one of the most stable platforms available, a requirement for banking transactions. This "e-banking" software simply receives your company's electronic, pre-authorized debit and credit payments from your bank and routes them to the designated receiving banks. Functions
Benefits
Features
The NACHA Web site (http://www.nacha.org/) says the following:
The ACH Network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system governed by the NACHA Operating Rules, which provide for the 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 entries.
Figure 1 shows the flow for e-banking transfers using the ACH Network. Above, the Originator is any individual, corporation, or other entity that initiates entries into the Automated Clearing House Network. The Receiver is the recipient of funds transferred through ACH. ODFI is the originating depository financial institution. RDFI is the receiving depository financial institution (click image to enhance). |
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| Last Updated ( Friday, 21 March 2008 ) | |
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