The Automated Clearinghouse Network

The ACH network is a financial network designed for batch processing of funds. Debits and credits can be automatically processed, resulting in an efficient clearing of funds between participating financial institutions. The use of the ACH network is governed by the NACHA (National Automated Clearing House Association) operating rules. Typical uses of the system include direct deposit payroll, consumer bill payments, check conversion and online payments. Participation in the system must be authorized. Many ACH vendors include terminology in their contracts requiring participation as part of the agreement.

ACH Roles

Originator Any entity that initiates entries into the ACH network.

Originating Depository Financial Institution (ODFI) A participating financial institution that originates ACH entries at the request of and by agreement with it's customers.

Receiving Depository Financial Institution Any financial institution qualified to receive ACH entries that agrees to abide by the NACHA Operating Rules and Guidelines

Receiver An individual, corporation or other entity who has authorized an Originator to initiate a credit or debit entry to a transaction account held at an RDFI.

Financial Institution A bank, savings association, credit union, or any other person that directly or indirectly holds an account belonging to a consumer, or that issues an access device and agrees with a consumer to provide electronic fund transfer services.

Standard Entry Classes

SEC Codes identify the ACH type. Some of the more prominent codes:

ARC Accounts Receivable Entries. A check received by a merchant via mail in payment, converted to ACH

BOC Back Office Conversion. A check that is converted from paper to an electronic debit , for example, Check21.

CCD Corporate Cash Disbursement. A business to business transaction.

POP Point-of-Purchase. In-person to a merchant at the point of sale, cleared as an ACH entry.

POS Point-of-Sale. A transaction at a terminal paid for using a debit card.

PPD Prearranged Payment and Deposits. Used to credit or debit an account. Used for direct deposit payroll and recurring bill payments.

WEB Web Initiated-Entry. Electronic authorization through the Internet to create an ACH entry.