The ACH clearing facility then processes the transaction and sends the funds to the Receiving Depository Financial Institution (RDFI) or merchant’s bank.

The customer’s bank, the Originating Depository Financial Institution, or ODFI, sends the transaction to the ACH clearing facility. The customer in turn shares their banking information, routing number, and account number, and authorizes the charge. As a merchant, you provide the transaction total or subscription amount to the customer. In simple terms, ACH payment processing is an alternative “payment railway” to credit card payments because the authentication and approval process is completely different. It supports various transaction types, from direct deposits to recurring bill payments, and has evolved to offer faster processing options, including same-day transfers. Nacha connects all US financial institutions to enable the secure movement of money from one bank to another. The ACH network performs key functions, including payment processing, clearing, and settlement, all under the governance of the National Automated Clearing House Association (Nacha). The Automated Clearing House (ACH) is an electronic payment network in the US that facilitates the secure and efficient transfer of funds between financial institutions. It facilitates ACH transaction processing on the same day. Same Day ACH has contributed to the growth of ACH payments over the past few years.While ACH payments offer many advantages, they have some limitations, such as specific cutoff times for processing, and are not well-suited for fast-paced retail or point-of-sale transactions.ACH payments are not ideal for point-of-sale transactions but are well-suited for online and subscription-based businesses.Modernized ACH networks provide faster processing times, including same-day transfers. ACH payments are a cost-effective and efficient choice for small businesses, offering lower processing fees and improved stability for recurring transactions.ACH payments have seen significant growth, totaling $76.7 trillion in 2022, which is an increase of 5.6% over 2021.

What is an ach credit or debit