Automated Clearing House The Automated Clearing House (ACH) network is a payment system that allows corporations and individual consumers to make payments without the use of paper checks. The ACH system was developed in the early 1970’s as the increasing volume of paper checks was expected to grow beyond the processing capacity of computer systems at that time. Initially, the system utilized magnetic tapes and diskettes that were manually transported between participants in the ACH system. In 1994, the Federal Reserve mandated that ACH payment files would be transferred electronically. From the mid 1990’s through 2001, the number of transactions processed through the ACH network has more than doubled to over 8 billion annual transactions. As consumers and businesses continue to gain comfort with electronic data transmission, the number of annual ACH transactions will continue to grow.

ACH Volume has doubled in the past five years.   ACH Transaction Volume (Billions) Source: Federal Reserve Website (www.federalreserve.gov)

NACHA

The National Automated Clearing House Association (NACHA), formed in 1974, is a trade association that oversees and develops operating rules for commercial ACH payments. NACHA represents more than 12,000 financial institutions through direct memberships and a network of regional payments associations, and 650 organizations through its industry councils. NACHA develops operating rules and business practices for the ACH Network and for electronic payments in the areas of Internet commerce, electronic bill and invoice presentment and payment (EBPP, EIPP), e-checks, financial electronic data interchange (EDI), international payments, and electronic benefits transfer (EBT). Visit NACHA on the Internet at www.nacha.org.

Third Party ACH Processors

Third party ACH processors like Smart Payment Solutions are revolutionizing the ACH industry by spreading the benefits of electronic checks to many new industries. These benefits have previously been available only to companies which could make large investments in technology. Now small technology companies have developed flexible, nimble software programs, and companies like Smart Payment Solutions can offer ACH processing services to organizations taking a few dozen payments per month as well as to organizations taking tens of thousands of payments each month. Since access to the ACH network is limited to financial institutions, these third party ACH processors must have an agreement with a financial institution to route their transactions through.

Are you ready to start accepting ACH payments?