Automated Clearing House Network and Transfers – Upcoming Changes

Customer transferring funds using mobile banking app on cell phoneBanking services are a fundamental part of our economy and few of these services are more essential than money transfer. In fact, the facilitation of money transfer has been considered a fundamental service for centuries, with evidence of money transfer services stretching all the way back to the Roman Empire. With advances in technology over the decades, today most financial institutions in the United States use ACH transfers, or Automated Clearing House transfers.

The Automated Clearing House Network

The Automated Clearing House network is a batch processing system that collects transactions throughout the day to be later batch executed. In more simplified terms, the ACH Network is a system that records and facilitates the moving of money between individuals and institutions. ACH transfers are used for many different types of transactions, including Direct Deposit, recurring and one-time payments, international payments and interbank transfers.

According to the National Automated Clearing House Association (NACHA), the ACH Network handles more than $41 trillion and more than 24 billion electronic transactions annually. The ACH Network is considered such a safe transactional standard that it is used for a large percentage of all payments across the globe. NACHA reported that in the first three months of 2016, more than 5 billion Direct Deposits and Direct Payments were recorded and more than $10 trillion worth of transactions occurred in these three months alone.

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The ACH Network is one of the main building blocks of our banking system. At some point, we all end up using an ACH transfer to either pay our bills, receive a payment or to make a personal cash transfer to a friend or family member. These transfers are either debit or credit and are recorded electronically, rather than with paper, making the entire payment process quicker and more secure. Additionally, because the transactions much be cleared by the two ACH Operators – the Federal Reserve and the Clearing House – these is an added layer of security. Generally, transactions are settled within one or two days.

Upcoming Changes to the ACH Network

The ACH Network has enabled individuals, businesses and the government to interact with one another in a safe financial payment system. The network is currently undergoing upgrades as well. NACHA recently announced a new rule that is intended to improve the quality of the ACH Network and reducing the number of unauthorized transactions. Another rule announced by NACHA requires that banks who facilitate ACH transfers for third-parties must now provide “a limited set of initial, basic registration information for each Third-Party Sender.”

Another major rule change to the ACH Network begun making headlines in September of 2016. Following improvements in technology, NACHA was able to implement ‘Same Day’ ACH transfers for some select institutions. Between September 23rd and December 31st of 2016, the first three months the same-day ACH transfer technology was in operation, more than $17 billion was processed via Same Day ACH. The association is slowly rolling out new rule changes that will implement Same Day ACH transfers in phases through March 16, 2018.

Posted on March 9, 2017 by in Personal Finance

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