ACH Payments

What is ACH?

ACH, or Automated Clearing House, is a network that facilitates electronic payments and automated money transfers without using checks, wire transfers, credit cards or cash. The ACH network is overseen by the National Automated Clearing House Association (NACHA).

Transactions like direct deposits, online shopping  and vendor payments are often done via ACH. ACH payments are faster than traditional payment forms because the ACH Network batches financial transactions together and processes them throughout the day, enabling same-day money transfers.

How ACH Payments Work

Let's say a consumer needs to pay their phone bill. They're the originator, starting a direct deposit or direct payment transaction–either debit or credit.

An ACH operator, either the Federal Reserve or a clearinghouse, receives a batch of ACH transactions with the originator's transaction included. The ACH operator sorts the batch and makes transactions available to the bank or financial institution of the intended recipient, also known as the receiving depository financial institution (RDFI). The recipient's bank account receives the transaction, thus reconciling both accounts and ending the process.

How do ACH Payments Impact Financial Institutions?

Financial institutions and services provide the products needed for consumers and businesses to leverage the Automated Clearing House. As ACH payments become more and more prevalent, financial institutions need to adapt to changing consumer standards for speed, efficiency and easy of use. 

In 2018 alone, ACH moved nearly 23 billion electronic payments, according to NACHA. That makes the ACH Network one of the largest, safest and most reliable payment systems in the world. Envestnet | Yodlee Account Verification comes into play for banks implementing ACH debits and credits. 

Institutions need to be able to verify a person's identity, validate the account balance and establish whether or not the designated account is eligible for ACH.