ACH 101: What are ACH payments?What is ACH Payment?

​To best understand what ACH is, we should take a trip back in time to 1968 in which a group of Bankers in California realized that there was a very real problem in need of a solution, paper checks, an increasing volume, and a realization that the technology of the time would soon be surpassed not to mention the equipment trying to keep pace. Springing from their concerns helped form the Special Committee on Paperless Entries, or SCOPE and by 1972 they had formed the first ACH association in California to process electronic payments. By 1974 other regional networks emerged and with these networks Nacha was created to be the administer the ACH Network.

What is the Automated Clearing House (ACH):
The Automated Clearing House (ACH) is the primary system used for electronic funds transfer (EFT). With ACH, funds are electronically deposited and managed in financial institutions, while Nacha manages the administration, governance, and development of the ACH Network. Nacha doesn’t facilitate the movement of monies nor has information on the data contained within a particular payment. Financial institutions, Third Party Service Providers and Third-Party Senders that participate in ACH must follow operating rules developed by Nacha.

How do consumers interact with ACH?
As an ACH credit, the payer has submitted an electronic/digital check in which the ACH Network transfers/pushes those funds to your account. Arguably the most recognized ACH Credit transaction is Direct Deposit from your employer. Every time one sees their paycheck deposited into their account, wallet or pushed to a debit card, ACH was seamlessly working in the background. Today’s consumers are keen on the time, they want instant credits to appear, prefer not to deposit paper in an ATM or brick and mortar Bank and there are folks out there disrupting the payments space with solutions.

Where else are we seeing the benefits and optimization for merchants and consumers of the ACH Network?
P2P payments, as a primary example, has become more than just a passing fad, and has greatly expanded the reach and accessibility of ACH payments within credits and debits. The free movements of monies between persons rides along the rails in the form of one account being debited while the other receives a credit, nearly instantly in approximately 20 seconds. The instant satisfaction of seeing the credit in your account is better than trying to divide up paper monies especially in our current environment. There are payments apps that facilitate solving the dinner bill divide and facilitates friends to “ACH” each other and ultimately paying the merchant, seamlessly, and instantly. We can move monies between like accounts and enable folks to get paid for all kinds of work in this ever-evolving gig economy. Take a survey, get paid, take a car ride pay and tip your driver, no time to make dinner, no matter the problem consumers face fighting for time and efficiencies, the ACH Network will be there facilitating payment so your dinner can be dropped off at your door.
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ACH is also behind the growing ease and conveyance of Direct Payments whether the end user sets up a one-time payment or allows a merchant access to their account to pull funds on a preauthorized and reoccurring basis. Online bill payment and mobile apps have enabled end users to transact with preauthorized debits, or the set it and forget it methodology, to ensure on time payments for your mortgage, credit card bill or utility bill. While paper checks are still here, consumers no longer must rely on the cost of postage and the possibility of a bill not getting paid in a timely manner. Additional consumer benefits to Direct Payments include payment apps that enable end users to set up reoccurring debits to pay a bill that in turn helps build credit, allows end users to seamlessly pay rent or any number of solutions that have been engineered to help the consumer payment experience and avoid additional costs, human error and save time.