ACH payment processing, initiated in the early 1970s, is electronic processing through the Automated Clearing House network between personal accounts , business accounts, financial organizations and government departments. This huge network, serving about 115 million people, 3.5 million companies, 20,000 institutions, is a national grid for electronic fund transfers between various bank accounts of both credit and debit financial transactions. ACH transactions are commonly referred to as “direct deposit.”

The transfers, done in electronic batches for credit and debit transactions between various financial institutions, is governed by a non-profit association called NACHA, or National Automated Clearing House Association. NACHA establishes the best business practices and the basic rules for the network. It has been responsible for unprecedented growth in the payment processing industry, and today credit and debit transactions through the ACH network has become a widely accepted way of doing business in the United States. In fact, it is considered the most efficient and cost effective way for electronic fund transfers in North America.

The way the ACH processing payment processing system is fairly simple. The ACH network and the Federal Reserve act as a central clearing system for credit and debit transfers between financial institutions. Thus, it acts as a medium for checking, saving, and loan fund transfers, among other financial transactions.

It makes financial transactions cheaper and faster because of the absence of time and cost in processing paper documents like checks, envelopes, stamps, dollar bills, and ledgers. A person can authorize their bank account to pay recurring bills like mortgage, rent, utility, memberships, and insurance premiums. The account holder does not have to take time to write checks and lick stamps, the post office does not have to deliver it, and the bill collector does not have to have a processing clerk to receive it. Instead, a few routine electronic blips completes the whole transaction in seconds using computer technology. Similarly, a consumer can just as easily receive a paycheck through ACH direct deposit and does not have to stand in a bank line during a lunch break to deposit it.

The ACH network makes cash management almost effortless. It saves money and it improves business work flow. A lot more business gets handled in less time, and it gets handled more efficiently.

NACHA has recently changed its name from The National Automated Clearing House Association to The Electronic Payments Association. Its goal is to develop methods to improve the ACH payment system. Operating rules and business practices focus on electronic payments for online bill paying, electronic checks and sales transactions completed on the Internet. It carries out many other functions in addition to being the governing force of the ACH payment system. A primary purpose is to develop new payment applications. In 2009, they discussed corporate adoption of ISO20022 within SEPA/Europe. Implementation at select customer sites will test the processes.

NACHA also introduced a solution that allows for invoice delivery, payment creation and auto-cash application integration into popular consumer and merchant accounting packages. It implements risk management tools to reduce risk and improve ACH quality. Marketing materials, public speaking engagements and advertising campaigns are intended to communicate the best use and return on investment of electronic payments. There are many advantages to direct deposits for all parties involved, and their national campaign focuses on this.  During these campaigns, the goal is to provide updates on rulings and procedures. Communication to its direct members and regional payment associations is ongoing.

NACHA issues and concerns are addressed using many venues, from workshops and conferences to journal and periodical articles.  To become a member of the ACH network, a business must meet all of their processing requirements and certifications. There are several levels of membership.  Becoming part of the industry councils and programs provides the opportunity to sponsor business to business billing and payment programs, network with industry experts and participate in global payment forums. Direct members affect the business and legal structure of products and services offered by the ACH. They are actively involved in the voting process that affects the ACH operating rules and standards.

The NACHA members that are regional payment associations are predominantly non-profit trade associations. Their members include commercial banks, savings and loans or credit unions. To become a direct member of the Electronic Payments Association, the business must already be a member of one of the regional associations. Electronic payments are becoming the preferred payment method by merchants and consumers alike. Affiliate members have access to the latest developments and they receive the materials and information directly from the Electronic Payments Association. Contact National Processing for more information on how they can best serve all of your electronic payment needs.

For more information please contact us at www.nationalprocesssing.com or call us at 877-458-3323