Automated Clearing House

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Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills. Debit transfers also include new applications such as the point-of-purchase (POP) check conversion pilot program sponsored by NACHA – The Electronic Payments Association. Both the government and the commercial sectors use ACH payments. Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.[citation needed]

Rules and regulations that govern the ACH network are established by NACHA (formerly the National Automated Clearing House Association) and the Federal Reserve. In 2012, this network processed an estimated 21 billion ACH transactions with a total value of $36.9 trillion.[1] Credit card payments are handled by separate networks.

The Federal Reserve Banks are collectively the nation's largest automated clearing house operator, and in 2005 processed 60% of commercial interbank ACH transactions. The Electronic Payments Network (EPN), the only private-sector ACH operator in the U.S., processed the remaining 40%. FedACH is the Federal Reserve's centralized application software used to process ACH transactions. EPN and the Reserve Banks rely on each other for the processing of some transactions when either party to the transaction is not their customer. These interoperator transactions are settled by the Reserve Banks.

Uses of the ACH payment system[edit]

SEC codes[edit]

Some common Standard Entry Class (SEC) codes:

ARC
Accounts receivable conversion. A consumer check converted to a one-time ACH debit. The difference between ARC and POP is that ARC can result from a check mailed in whereas POP is in-person.[2]
BOC
Back office conversion. A single entry debit initiated at the point of purchase or at a manned bill payment location to transfer funds through conversion to an ACH debit entry during back office processing. Unlike ARC entries, BOC conversions require that the customer be present, and that the vendor post a notice that checks may be converted to BOC ACH entries.[3]
CBR
Corporate cross-border payment. Used for international business transactions, replaced by SEC Code IAT.[4]
CCD
Corporate credit or debit. Primarily used for business-to-business transactions.
CIE
Customer Initiated Entries. Use limited to credit applications where the consumer initiates the transfer of funds to a company for payment of funds owed to that company, typically through some type of home banking product or bill payment service provider. [5]
CTX
Corporate trade exchange. Transactions that include ASC X12 or EDIFACT information.[2]
DNE
Death notification entry. Issued by the federal government.
IAT
International ACH transaction. This is an SEC code for cross-border payment traffic to replace the PBR and CBR codes. The code has been implemented since September 18, 2009.[4]
PBR
Consumer cross-border payment. Used for international household transactions, replaced by SEC Code IAT.[4]
POP
Point-of-purchase. A check presented in-person to a merchant for purchase is presented as an ACH entry instead of a physical check.
POS
Point-of-sale. A debit at an electronic terminal initiated by use of a plastic card. An example is using your debit card to purchase gas.
PPD
Prearranged payment and deposits. Used to credit or debit a consumer account. Popularly used for payroll direct deposits and preauthorized bill payments.
RCK
Represented check entries. A physical check that was presented but returned because of insufficient funds may be represented as an ACH entry.
TEL
Telephone-initiated entry. Oral authorization by telephone to issue an ACH entry such as checks by phone. (TEL code allowed for inbound telephone orders only. NACHA disallows the use of this code for outbound telephone solicitations unless a prior business arrangement with the customer has been established.)
WEB
Web-initiated entry. Electronic authorization through the Internet to create an ACH entry.
XCK
Destroyed check entry. A physical check that was destroyed because of a disaster can be presented as an ACH entry.

See also[edit]

References[edit]

  1. ^ "ACH Payment Volume Exceeds 21 Billion in 2012". NACHA. 2013-04-09. Retrieved 2012-04-15. 
  2. ^ a b "ACH Glossary". Ach.com. Retrieved 2012-10-24. 
  3. ^ "POP, ARC & BOC comparison". Witsends.com. Retrieved 2012-01-08. 
  4. ^ a b c "NACHA Moves Back IAT Deadline to Allow More Time for Testing". Retrieved 2012-01-08. 
  5. ^ "Understand the ACH Network: An ACH Primer". Retrieved 2013-11-26. 

External links[edit]