ACH Network: How it Works

Making Electronic Payments Seamless and Secure

How the ACH Network Electronically Moves Money and Data

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New innovations and technology are changing the way consumers and businesses access, move and use their money.

With the increasing movement toward an electronic, interconnected and mobile infrastructure, it’s critical that electronic payments work safely and efficiently for all users. The ACH Network enables just that: by using batch processing and a store-and-forward system, it moves almost $39 trillion and 22 billion electronic financial transactions each year. For more than 40 years, NACHA has been the trustee of the ACH Network, employing a collaborative, self-regulatory model to facilitate the expansion and diversification of electronic payments on the ACH Network.

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How the ACH Network and ACH Payments Work

NACHA includes Members in the process of establishing Rules for the ACH Network, working collaboratively to create a clear picture of participant roles and responsibilities in the following ACH transaction process.

  1. An Originator– whether that’s an individual, a corporation or another entity– initiates either a Direct Deposit or Direct Payment transaction using the ACH Network. ACH transactions can be either debit or credit payments and commonly include Direct Deposit of payroll, government and Social Security benefits, mortgage and bill payments, online banking payments, person-to-person (P2P) and business-to-business (B2B) payments, to name a few.
  2. Instead of using paper checks, ACH entries are entered and transmitted electronically, making transactions quicker, safer and easier. 
  3. The Originating Depository Financial institution (ODFI) enters the ACH entry at the request of the Originator. 
  4. The ODFI aggregates payments from customers and transmits them in batches at regular, predetermined intervals to an ACH Operator. 
  5. ACH Operators (two central clearing facilities: The Federal Reserve or The Clearing House) receive batches of ACH entries from the ODFI. 
  6. The ACH transactions are sorted and made available by the ACH Operator to the Receiving Depository Financial Institution (RDFI). 
  7. The Receiver’s account is debited or credited by the RDFI, according to the type of ACH entry. Individuals, businesses and other entities can all be Receivers. 
  8. Each ACH credit transaction settles in one to two business days, and each debit transaction settles in just one business day, as per the Rules

Third-Party Service Providers also perform vital services for ACH Network users such as Originators, ODFIs, RDFIs and Receivers. When engaged and authorized, these Third-Party Service Providers can perform Network user functions, arrange transactions and otherwise increase efficiency for ACH Network participants.

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For more than 40 years, NACHA – the Electronic Payments Association – has served as the trustee of the ACH Network. That Network, which today moves more than 20 percent of all electronic transactions each year, requires careful development, administration and rules in order to function effectively, and NACHA provides crucial management on a daily basis.
Through its collaborative, self-regulatory model, NACHA—and the more than 10,000 financial institutions it represents—facilitates the expansion and diversification of electronic payments on the ACH Network. That includes supporting Direct Deposit and Direct Payment transactions such as ACH credit and debit transactions, recurring and one-time payments, government, consumer and B2Btransactions, international payments and payment related-information. Through NACHA’s expertise and guidance, the ACH Network is now one of the largest, safest and most reliable payment systems, creating value and enabling innovation for all participants.

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Advocating for the Network

Engagement and trust in the ACH Network keeps it effective. To that end, NACHA continually advocates for the ACH Network and NACHA Operating Rules through education and dialogue. We engage policymakers, regulators, and consumer and industry groups to help them understand how the Network functions as well as the benefits of private-sector rulemaking. Through inclusive rulemaking, engagement, education and accreditation programs, we strive to make the value of the ACH Network clear and accessible to all involved parties.