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What is ACH?
An Electronic Payment Network used by individuals, businesses, financial institutions and government organizations for electronic transfer of funds . It allow payment to electronically debit or credit to a checking account, saving account, financial, institution general ledger account or credited to a loan account. ACH Payment is the main elements of electronic transfer of money and data in safe and secure way. Whether you have a large or small organization the ACH network facilitates billions of payments such as Direct Deposit via ACH and Direct Payment via ACH.
How the ACH Network Functions?
FundTransferInitiation– This stage is initiated by an Originator. An originator is someone who initiates an ACH transaction of either requesting money or sending money. The Originator must have authorization from the other party. When the customers use the service, the company sends a request to bank to debit the customer’s account.
Authorization Stage -The purpose of the ACH processor bank is to securely connect the company or business person’s bank to their customer’s bank. It receives the authorization request in the form of an ACH file and sends it to the customer’s bank.
Primary fund transfer –This is when the funds are moved from the customer’s bank account to the ACH processor bank. This may take 1-3 days but is usually done overnight.
Secondary bank transfer– This is when funds are transferred from the ACH processor bank to the company’s bank account. After the processor bank has completed analyzing the primary fund transfer transaction, it automatically sends the funds to the company’s bank account.