The ACH Network: Complying with this new system (A How-To)

Posted on 05-18-2016 by
Tags: Industry Insights & Trends , Banking , Trending News & Topics , LIT , sheshunoff , cybersecurity , Securities

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The article below has been republished, written by Holly Merrill, co-author of two books from LexisNexis Sheshunoff: Automated Clearing House Transactions: Operations, Compliance, and Audit and the ACH Training Manual.

For the millions of Americans who receive electronic payments directly into their bank accounts, a new system is about to go into place that will allow those payments to be made faster than ever. For banking executives and the legal counsel who advise them, the stakes are very high for successful compliance with this new system.

Most consumers are familiar with “ACH” payments system without even realizing it. For example, when employers pay their workers through direct deposit -- or consumers pay bills electronically out of checking accounts -- the ACH network is probably responsible for those payments. According to NACHA, the electronic payments association behind the ACH network, more than 23 billion ACH payments were made last year.

ACH payments are electronic payments made through the Automated Clearing House (ACH) network, which many people are surprised to discover has been in existence since the late-1970s, far before anyone had ever heard of the Internet or mobile transfers.

ACH was originally conceived as a “batch” payment system for banks and credit unions. The upside has always been that ACH is more cost-effective than wire transfers and other payment systems. The downside has been that payments are not real-time and require a couple days to actually be processed and for the money to change hands.

ACH payments are simply electronic transfers from one bank account to another. These transactions are popular alternatives to checks and credit card payments because they use fewer resources, thereby reducing costs for financial institutions and their business customers.

Moreover, since ACH payments are electronic, there is less risk of errors from human data input and less hassle involved with mailing checks.

There are a number of important implications to the new Same Day ACH rule that banking executives and their legal counsel need to contemplate.

Once Same Day ACH is fully implemented, any originating financial institution can issue payments that must clear on the same day, knowing that all receiving institutions will be required to process the transactions that same day. This change will allow businesses and consumers to move money faster throughout the financial system.

However, there will undoubtedly be a number of bumps and bruises along the way to full implementation. Banking executives and their legal counsel will need to remain in close communication as the organizations attempt to mitigate risk and ensure compliance with the groundbreaking Same Day ACH rule.


Download the full PDF, “Same Day ACH Allows Payments to Move Faster,” for deeper insights into the new laws’ implications.

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About the Author:

Photo Credit: GIACT

Holly Merrill, AAP, is the Chief Compliance Officer for GIACT Systems, a national provider of Account and Identity Verification Services. Holly has more than 37 years of experience in payments, including serving as CEO of PaymentsPLUS, CEO of Payments Resource One (PRO) one of the Regional Payments Associations that was also one of the private sector ACH operators. She is also a past member of the NACHA Board of Directors, the National Organization of Check Clearing Houses Board of Directors.

Holly is co-author of two books from LexisNexis Sheshunoff: Automated Clearing House Transactions: Operations, Compliance, and Audit and the ACH Training Manual. She is also a frequent speaker and conducts Sheshunoff's ACH certification training webinars.

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