Automated Clearing House Payments (ACH)

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What are Automated Clearing House (ACH) payments?

Automated Clearing House (ACH) payments refer to digital payments made through the ACH, a payments system in the U.S for transferring electronic funds. These payments include two categories: ACH credit or ACH debit transfers, which can include peer-to-peer payments, bill payments, direct deposits and external fund transfers for consumers and businesses.

The Automated Clearing House network processes these ACH payments 23 hours out of every day and settles payments four times a day in batches. While these payments can take up to several business days to clear, recent regulatory changes mean that most debit and credit transactions can clear on the same business day.

The downside of an Automated Clearing House transfer is that these payments are processed in batches, which means not in real-time like instant payments. Another disadvantage is that FIs can restrict the amount that a person can transfer.

How do automated clearing house payments work?

If we look at how the Automated Clearing House system works, it begins with a payer making a direct deposit using the ACH network. Their bank groups that transaction into a batch with other ACH transactions. Then an ACH operator receives that batch and sorts the transactions and sends them to the recipient’s bank. The recipient’s bank receives the payment and settles both accounts.

Automated clearing house vs wire transfer

An ACH payment and wire transfer are both forms of electronic payment. A wire transfer is another way to transfer money between banks. The wire transfer is sent through a wire network like the Clearing House Interbank Payments System (CHIPS) or the Federal Reserve Wire Network. These payments are typically faster and more expensive than ACH payments.

How to streamline ACH verification

Leading financial institutions employ modern payment authentication tools that help them improve the efficiency of ACH payment verification. Solutions, such as authentication built in to the mobile app or browser or push notifications, can help FIs reduce the number of calls made to call centers to verify these payments. As a result, the payment authentication process is faster, streamlining call center operations and reducing costs.

Additional resources:


ACH (Automated Clearing House) | Authorized push payment Fraud | Payment authentication