We have to give a lot of thanks and gratitude to the people who devised the Automated Clearing House (ACH). With the establishment of this system, the amount of paper used in processing payment and fund transfer transactions are greatly reduced. ACH processing can be thanked for the reduced costs in printing checks, paper bills and coins. Perhaps the greatest contribution of the Automated Clearing House s the faster processing of payments.
ACH Processing involves a series of procedures done by parties to a business transaction. Most of the time, ACH processing is about transfer of funds between buyer and seller in order to settle obligation or amount owed. The faster processing of payments is surely something to thank about but do you know the institutions responsible for ACH Operations?
The Federal Reserve Banks
Processing of ACH payment involves three steps; the creation of fund transfer order, validation by the ACH Operator and the actual transfer of funds. We all know that a fund transfer can only be initiated by the party who has an obligation to the seller or merchant. After he initiates the transfer of funds, the ACH operator steps in to facilitate payments. In the case of the United States of America, the major ACH operator is the Federal Reserve Bank.
The Federal Reserve Bank is connected with all authorized banks in the USA. They are connected by a single and secure system that allows transfer of funds between banks. This system and network is the reason why payment and transfer of funds can be done in real-time. The Federal Reserve Bank processes 60% of all ACH payment and other fund transfer transactions in America.
The Electronic Payments Network
Processing of the remaining 40 % of ACH payment and other interbank transactions are being done by the Electronic Payments Network (EPN). Unlike the Federal Reserve Banks which are government-owned, the Electronic Payments network is operated by private institutions. Similarly, the EPS is also connected to a large network of banks which offer ACH services. This allows faster transfer of funds between banks, suppliers and consumers.
Banks Need to Have ACH Services
ACH services are a must if you want to initiate a transfer of funds between a consumer and a supplier. Banks that have this facility can make the most out of the ACH network and can enjoy facilities such as payroll-servicing, payment of recurring bills, transfer of social security benefits, crediting of pension and other fund-transfer services.
The Automated Clearing House or ACH is continually expanding their network so that more banks can avail of ACH services. This will not only increase the profits of the Federal Reserve Banks or the Electronic Payments Network but will also help reach out to sellers, merchants and suppliers who want to make use of the lightning-fast fund transfer facilities.