What is ACH

ACH is the abbreviated form of Automated Clearing House.

The basic definition of ACH is that the Automated clearing house system is primarily the Electronic Fund Transfer (EFT) system which is used widely in the commercial purposes. The Automated Clearing House system is widely used because of its secure network. The ACH system is used in banks, multinational companies (MNC’s), for the functions of financial transactions such as direct deposits, electronic payment, business-to-business payments and also some type of debit card payments.

The ACH payment system is also known as electronic cheques or E-cheques.

Nowadays, when the technology is about to reach to the upper limit, there had been a necessity everywhere to decrease the time consumption in any process and to increase the accuracy of that process. That’s why the Automated Clearing House system is used both in the private sector as well as the public sector. In the public sector, various companies are using the ACH system because of their secure network. Electronic transfers from the bank to the account of any personnel is done through ACH system and there is a wide variety of function in the era of online banking which are entertained through the ACH system.

As we have mentioned above that the ACH system is used both in the commercial sector as well as in the government sector, accordingly we will explain why it is necessary to use the ACH system in the commercial sector. For this, we will take an example of business functions which is probably known as the brightest part of the commercial sector. In the field of business, the businesses are preferably using the ACH system to modify their payment option from cash payment or cheque payment to online payments. The main reason for sustaining ACH system is that it is an advanced technology for high risk processing which increases profit margins and decreases operating expenses.

There are various advantages of using the ACH system. They reduce errors, save resources, speed up things, increase cash flow, decreases accounts receivables, automates business operations etc. By the application of the ACH system which are going on nationwide, customers can pay to the service providers, employer can deposit money to the employee account, consumer can move funds from one bank to another, and businesses can pay supplier for their products.

The rules and regulations on which the ACH system is working is established by the National Automated Clearing House Association formerly known as “NACHA”.

In 1998 the ACH network has processed an amount more than $16 trillion by processing nearly 5.3 billion ACH transactions and afterwards in 2002, this network has processed an amount of $21.7 trillion by processing 8.05 billion ACH transactions.