ACH Network

Discuss the timing of ACH payments

- Traditional ACH payments typically two to three business days, although weekends and holidays can slow down the process. In today's on-demand world, that's too slow—especially for an electronic system. Same day ACH payments began in 2016, and functionality is expanding, so you should expect to see faster payments soon.

What are the 2 main differences between ACH & Credit Card Payments?

1) An ACH payment can be reversed for insufficient funds whereas a Credit cards guarantees payment, as long as the cardholder is within their credit limits. note: With ACH payments, it may take several business days for the ACH to realize there are insufficient funds in an account. 2) Vendors accepting credit cards may be an expensive option as credit card companies charge fees to the vendors. ACH offers an inexpensive and often free option to handle electronic payments.

What are the Steps? 1) It starts when...... 2) Later that day ...... 3) The operators then ....... 4) The RDFI then 5) Before the latest improvements the transactions take......

1) Originating Depository Financial institution (ODFI) enters the ACH entry at the request of the Originator. 2) The ODFI aggregates payments from customers and transmits them (using FTP see next card) in batches at regular, predetermined intervals to an ACH Operator (two central clearing facilities: The Federal Reserve or The Clearing House) 3) ACH Operator sort the transactions from all ODFIs and send them in batches to the Receiving Depository Financial Institution (RDFI). 4) The Receiver's account is debited or credited by the RDFI 5) - ACH credit transaction settles in one to two business days - ACH debit transaction settles in just one business day

Name the 4 parties involved in ACH transactions?

1) Originator - An individual, a corporation or another entity that *initiates* either a Direct Deposit or Direct Payment transaction using the ACH Network 2) .Originating Depository Financial institution (ODFI) 3) Receiving Depository Financial Institution (RDFI) 4) ACH Operators (two central clearing facilities: The Federal Reserve or The Clearing House)

What are two types of ACH transactions that can be initiated?

ACH transactions can be either debit or credit payments and commonly include Credits: Direct Deposit of payroll, government and Social Security benefits Debits: Mortgage and bill payments, online banking payments, person-to-person (P2P) and business-to-business (B2B) payments, to name a few.

FTP

File Transfer Protocol File Transfer Protocol (FTP) is a standard Internet protocol for transmitting files between computers on the Internet over TCP/IP connections.

If an App develop similar to Venmo wanted it's app to be able to do ACH Debits or Credits for its users what would it first have to do?

In order to initiate an ACH credit or debit on someone's bank account, you first need to find a bank who is willing to proxy these transactions on your behalf. Only banks are allowed to initiate ACH transaction directly. You'll need to open a business account with a bank and request the ability to originate — the technical term for send — ACH transactions through them. If they agree, they'll become your ODFI, which stands for "Originating Depository Financial Institution," but really it's just a fancy term for "bank".

ACH a) Stands for? b) What are ACH Payments c) Give a high level description of what it does d) How is processing of an ACH different from a paper Check? e) What are the most common uses of ACH transactions? f) What information has to be transmitted for ACH Debits and Credits?

a) Automated Clearing House b) electronic payments made through the Automated Clearing House (ACH) Network. c) Funds move from one bank account to another with the help of an intermediary that routes funds to the final destination. d) Not very different as both or accumulated in batches and then sent to an intermediary. ACH are often referred to as an "eCheck" or electronic check e) Common Uses ACH Credits: Direct Deposit of payroll, government and Social Security benefits ACH Debits: mortgage and bill payments, online banking payments, person-to-person (P2P) and business-to-business (B2B) payments f) 1) The name of the bank or credit union receiving funds 2) The type of account at that bank (checking or savings) 3) The bank's ABA routing number 4) The recipient's account number 5) The amount of debit or credit

Discuss a Plaid customer that uses ACH? - Who - What do they do? - How do they use ACH?

a) GUSTO b) Payroll for small businesses Gusto hit 60,000 customers nationwide in January, or roughly 1% of all employers in the United States, according to the company. c) They need to transfer funds (ACH Credit) from say a small business account into the individual employee accounts

Debit Card a) Is this an ACH? b) Explain the differences?

a) NO as it draws direct from the account without an intermediary b) Unlike with a wire transfer or a debit card, where each transaction is processed individually, ACH handling takes place in large batches in regular, predetermined intervals. Batched transactions are sent to either the Federal Reserve or a secure clearinghouse. After sorting, individual transactions go to the receiver's bank, which debits or credits the person's bank account.

a) What is an example of 3rd party apps that use ACH for P2P? b) In what ways are the services similiar to banks

a) PayPal, Venmo and Dwolla b) they are not affiliated with banks but since they are also wallets, meaning users store funds in their P2P account until sending a payment or offloading to a bank account. In fact, if PayPal were a bank, its collective holdings in all of the individual accounts would make it the 21st largest bank in the U.S.

Read this article that Plaid wanted you to read

https://engineering.gusto.com/how-ach-works-a-developer-perspective-part-1/