The History of the Automated Clearing House

Comments Off on The History of the Automated Clearing House 02 August 2011

The Automated Clearing House, (ACH), is a protected transaction transfer system that enables United States finance institutions to connect to each other. The ACH network operates as the primary clearing center for all Electronic Fun Transfer, or EFT, transactions that occur. This link within the banking system has become vital to the way the world does business. ACH transactions are a fast, cost-effective and far more efficient way to conduct business than the traditional paper check processing. The ACH network is the place where payments are held while it gets cleared for its final banking destination. By way of a secure network used to link financial institutions together, ACH transactions are sent in an electronic format between banks through data transmission. This is one of the main reasons why the ACH network is so much quicker as opposed to the classic paper check processing.

The following services are viewed as ACH transactions:

-Online bill pay -Direct deposit -Direct debiting -Business-to-Business payments (B2B) -Electronic checks (e-checks) -Electronic Commerce transactions(e-commerce) -Federal, state and local tax transactions

History of the Automated Clearing House

The Automated Clearing House was initially founded in 1972 by a joint effort between financial institutions and the regional Federal Reserve. It was established in an effort to facilitate paperless check transactions. The National Automated Clearing House Association, or NACHA, was set up in 1974 as a way to coordinate endeavours to develop a national ACH network. In 1978, all of the nationwide networks were finally digitally linked.

In 1980, the Monetary Control Act passed. This act allowed private sector ACH operators the ability to contend with the Federal Reserve Bank. These days, there are 3 acknowledged private sector ACH operators. They are:

-American Clearing House Association -New York Automated Clearing House -VisaNet ACH Services

Nonetheless, the Federal Reserve Board conducts 85% of all ACH transactions.

Benefits of Using the Automated Clearing House

ACH transactions can be used for any kind of payment transaction which may need to be processed online for your enterprise. These transactions are a lot more flexible and cost-effective than accepting credit card payments and paper check transactions. In addition, it reduces the need to mail payments, which is a substantial benefit alone. Mailing payments is slow and by using ACH transactions in its place, you will not need to pay for postage, enevelopes nor will you have to spend time writing up the transaction.

Because the ACH network saves so much time for firms and is a whole lot more affordable than traditional ways of making transactions, the Automated Clearing House has entirely changed the way in which we buy things. It’s fast, simple to use and available to everyone. As we look to the future of financial transactions, there is no doubt that ACH transactions will still be the way we accept and process payments for many years to come.

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