The Automated Clearing House (ACH) Network is a nationwide batch-oriented electronic payment network to transfer funds between financial institutions. ACH payments provide improved cash management capabilities and lower costs than traditional paper payments by electronically debiting or crediting a company's or individual's deposit accounts, such as checking and savings accounts.
The ACH Process consists of the following steps:
- A company or individual (Receiver) authorizes another company or individual (Originator) to initiate a transaction to their financial institution account.
- Then the Originator submits the transaction to an Originating Depository Financial Institution, known as an ODFI.
- The ODFI collects ACH transactions and then submits the consolidated information to an ACH Operator.
- The ACH Operator processes the transactions from the ODFIs and distributes the transactions to the Receiving Depository Financial Institutions, know as an RDFI.
- The RDFI receives the entries for its customer accounts and then posts the entries on the settlement date of the transaction.
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