Automated clearing house
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|Part of a series on financial services|
An automated clearing house (ACH), or automated clearinghouse, is an electronic network for financial transactions, generally domestic low value payments. An ACH is a computer-based clearing house and settlement facility established to process the exchange of electronic transactions between participating financial institutions. It is a form of clearing house that is specifically for payments and may support both credit transfers and direct debits.
ACHs are designed for high-volume, low-value payments, and charges fees low enough to encourage the transfer of low-value payments. The system is designed to accept payment batches, so that large numbers of payments can be made at once.
The first automated clearing house was envisaged in the US in the late 1960s by a group of banks in California as a replacement for check payments.
ACHs process large volumes of credit and debit transactions in batches. ACH credit transfers include many types of payments: direct deposit, payroll, retail payments and vendor payments. ACH direct debit collections include consumer payments such as utility bills, insurance premiums, mortgage loans, and other types of bills. Transactions received by the bank during the day are stored and transmitted in batches to the ACH. ACHs are net settlement systems, so settlement may be delayed for day(s), and there is some settlement risk. ACHs may allow for the transfer of a limited amount of additional information along with payment instructions.
ACH payments contrast with Real-time gross settlement (RTGS) payments which are processed immediately by the central RTGS system and not subject to any waiting period on a one-to-one basis. ACH systems are typically used for low-value, non-urgent transactions while RTGS systems are typically used for high-value, urgent transactions.
This section describes in a generic way the typical operation of an ACH system. Each ACH system has its own specifics; see, for example, quick facts for the NACHA ACH Network in the United States and its terminology.
- The ordering customer makes a transaction initiation, which can be either manually or by sending a file of initiation requests to a bank.
- The bank gathers all transaction initiations for an ACH that arrive from different customers (combining manual and file-based).
- On a periodic basis, the bank creates a file that it dispatches to the ACH either at the end of day or in cycles throughout the day.
- The ACH operator combines the information submitted by the banks within each cycle (generally ACHs have several cycles throughout the day).
- The ACH operator informs each bank of the net settlement amount for which they are responsible for the cycle.
- The ACH operator ensures that the settlement amounts are received from all participants for the cycle, so that the cycle can be executed.
- The ACH operator informs the destinator's bank of the transaction details.
- When transaction arrives in the destination bank, the bank executes the transaction: such as crediting the payment to the beneficiary, while the ordering customer's bank debits the ordering customer's account.
There are various ACH systems around the world. The World Bank identified 87 systems in their 2010 Survey and 98 systems in their 2012 survey , while other sources have made qualitative analysis of a smaller number of ACH systems.
|Australia||Bulk Electronic Clearing System (BECS)|
|Austria||GSA and Oesterreichische Nationalbank|
|Bahamas||Bahamas Automated Clearing House (BACH)|
|Bangladesh||Bangladesh Automated Clearing House (BACH)|
|Belgium||CEC Centre for Exchange and Clearing|
|Brazil||SPB Sistema de Pagamentos Brasileiro|
|China||China National Advanced Payment System (CNAPS) Bulk Electronic Payment System (BEPS)|
|Colombia||ACH-Colombia and CENIT|
|Denmark||Eurogiro and Nets Group|
|Europe||a Pan-European automated clearing house for the Single Euro Payments Area, STEP2|
|Hong Kong||Interbank Clearing Limited|
|India||National Automated Clearing House and National Electronic Funds Transfer|
|Italy||Banca d'Italia, Nexi and SIA|
|Moldova||National Bank of Moldova|
|Nigeria||Nigeria Interbank Settlement System (NIBSS)|
|Philippines||PesoNet and InstaPay|
|Republic of Macedonia||KIBS|
|Singapore||eGIRO which is part of Singapore Automated Clearing House|
|Sweden||Bankgirocentralen BGC AB|
|Switzerland||Swiss Interbank Clearing|
|United Kingdom||Bacs Payment Schemes Limited and VocaLink|
|United States||Federal Reserve Bank's FedACH and The Clearing House's Electronic Payments Network, underpinned by NACHA's ACH Network|
In addition, there are various ACH associations such as the European Automated Clearing House Association.
Uses of the ACH payment system
There are various usages of ACH systems; the terminology related to different types of transactions varying in different countries. Most ACH payment systems support the following types:
- Credit Transfer
- Direct debit payment of consumer bills such as mortgages, loans, utilities, insurance premiums, rents, and any other regular payment
- Business-to-business payments, typically non-urgent
- Non-immediate transfer of funds between accounts at different financial institutions
- Clearing (finance)
- Clearing house (finance)
- Electronic funds transfer
- Pan-European automated clearing house
- Payment system
- Society for Worldwide Interbank Financial Telecommunication
- Wire transfer
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- "European Automated Clearing House Association". www.eacha.org.