Industry Needs

Leveraging the ACH Network

Use the ACH Network to Meet Unique Industry Needs

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The ACH Network’s versatility allows it to meet distinct needs in the payments industry. Specialized banking conventions related to taxes and child support, as well as specific rules and regulations for the governmental, international and healthcare realms increase the Network’s accessibility in those critical sectors. Development is ongoing as we aim to meet the needs of all Network participants.

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International Standards and Transactions

ISO 20022

ISO 20022, which was developed by the International Organization for Standardization (ISO), is the global messaging standard for financial business transactions, including payments. Today, many multinational companies are utilizing this standard as part of their accounts payable functions. Use of the standard enables greater automation and straight-through processing, and can help reduce payments processing errors. 

To help align the U.S. payments infrastructure with the global community, NACHA has been leading efforts to encourage and promote ISO 20022 adoption in the U.S. 

International ACH Transactions

As electronic payments have grown, so has their use across national borders. To ensure that cross-border payments are both efficient and secure, NACHA worked with the Office of Foreign Assets Control (OFAC) to develop a new ACH format that includes information on all parties to the transactions. This format allows RDFIs to easily comply with the Rules and streamline international payments.

International ACH Transactions (IATs) are now regulated under a Rule, which includes two major points:

  • It requires Gateway Operators to classify payments that are transmitted to or received from a financial agency outside the territorial jurisdiction of the U.S. as International ACH Transactions (IAT).
  • It includes information on all parties to the ACH transactions.

The Rule benefits RDFIs by making it easier to determine whether a transaction is domestic or international. It also allows those institutions to comply with legal obligations by including additional data and screening indicators, making it easier for RDFIs to intercept unlawful transactions.

International Remittances
 
International remittances are another area in which NACHA aims to help Network participants process electronic payments without hassle. Section 1073 of the Dodd-Frank Act instituted new regulations for international remittances, requiring remittance transfer providers to disclose certain fees, taxes and foreign exchange rates, as well as providing consumers with error resolution and cancelation rights.
 
The 1073 regulation is designed to increase consumer protection, but it’s complex. To that end, NACHA established the 1073 Solutions Center, which helps financial institutions understand the regulation, comply with it and find solutions for institutional and business needs.

International Payments Framework Association

NACHA is a member of the International Payments Framework Association (IPFA). The IPFA seeks to simplify global payments, and promotes the acceptance and use of the global operating framework for cross-border payments developed by the IPFA. Members are provided with a framework, associated processing rules and technical documentation, which support a highly standardized exchange of electronic messaging using international standards.

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Healthcare

NACHA partners with the healthcare industry, using the Rules to support the standardization of payments between health plans and providers. The adapted set of rules standardizes healthcare electronic funds transfers (EFTs), which is critical to the healthcare industry’s payments operation.
 
This collaboration between NACHA and the healthcare industry came about as a result of the Patient Protection and Affordable Care Act (ACA), which mandated identification of a healthcare EFT standard and the implementation of operating rules for all electronic healthcare transactions by January 1, 2014. By supporting the healthcare EFT standard, we’ve helped to:

  • Make EFT more efficient by leveraging the ACH Network and NACHA’s CCD+ as the healthcare EFT standard.
  • Reduce administrative costs for doctors and hospitals.
  • Save an estimated 800,000 pounds of paper by replacing paper checks with electronic transfers.

To develop new healthcare operating rules in support of the CCD+ standard, NACHA worked with the Committee on Operating Rules for Information Exchange (CORE), a part of the Council on Affordable Quality Healthcare (CAQH).
 
NACHA’s rules, which were implemented in September 2013, allow us to identify and track healthcare payments via ACH and provide for the automatic reassociation of healthcare payments with payment information. Our rules, in conjunction with the healthcare industry operating rules for EFT and electronic remittance advice (ERA), will help result in the continued administrative simplification by health care providers and health plans.

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Electronic Benefits Transfer: Quest® Operating Rules

Recognizing its demonstrated competency as a steward of inclusive, private-sector rule-making, the U.S. Department of Agriculture and Federal Electronic Benefits Transfer (EBT) Task Force selected NACHA to develop and administer national EBT rules for state governments in 1995. As individual states began to introduce systems to support the electronic delivery of government food and cash benefits within their own jurisdictions, both state and federal agencies agreed that a national rules set was necessary to instill interoperability between state programs and facilitate the uniform delivery of benefits nationally.

The Quest® Operating Rules are the foundation for nationwide Electronic Benefit Transfer (EBT), through which government entities can incorporate these Rules into their contracts with private-sector organizations that distribute benefits, providing for interoperability and uniform access across jurisdictions.

The adaptation of rulemaking for use in EBT represents one means of collaboration. As paperless financial transactions increase in the coming years, we hope to use our rulemaking competency as a basis for safe, smart, simple and green payments for additional areas of industry need.

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Banking Conventions

When we find that partners in a particular industry or government sector need to exchange payments and information in a specialized way, we collaborate to figure out the best use of the ACH Network. Banking conventions, or the formats used to present data in an Addenda Record, are one way that NACHA has adapted the ACH Network to meet specific needs. Using the right convention with the right payment process means smarter, more efficient electronic transfers.
 
When payments are made using the ACH Network for specific purposes, banking conventions provide a standardized way to format additional detailed information so the payment is more easily and readily applied. NACHA has three such banking conventions that are actively used: Tax Payment, Third-Party Tax Payments and Child Support. The linked implementation guides contain an overview of the formatting for each convention; for complete information on ACH Record Formats, see the NACHA Operating Rules.
 
Tax Payment Banking Convention (TXP) (revised December 2012)
This convention simplifies taxes for businesses by allowing them to transmit an ACH credit payment, with remittance detail, in a single transaction. NACHA has collaborated with industry partners to make TXP the standard means of business tax remittance, in a Corporate Credit or Debit (CCD) transaction, for the majority of the states, as well as many cities, counties and municipal tax authorities.
 
Third-Party Tax Payments Banking Convention (TPP) (revised July 2013)
The TPPparty payer and the taxpayer for whom the payment is being made:

  • When employee tax withholdings are remitted by payroll service providers on behalf of employers.
  • When employers remit payments in response to tax agency orders to produce employee wages for tax liability.

Child Support Banking Convention (DED) (revised February 2017)
This banking convention automates child support obligations, making it easy for an employer to electronically withhold the required portion of an employee’s paycheck and send that amount to the State Disbursement Units (SDUs). All SDUs are capable of accepting employer-originated child support withholding payments in this format.