What Is An ACH Payment? The Ultimate Guide To ACH

Learn about what is ACH payment, categories of ACH payments, characteristics, advantages, and disadvantages of ACH payments for your business.

Here at Orum, we’re all about money movement.

One way to move money is through what’s called an ACH transfer, which is the fastest growing payment method in the US, increasing in volume by 8.7% in 2021 alone.

So why do 87% of organizations use ACH credit for their payment transactions?

The main advantages of ACH can be summed up as follows:

Convenience
Security
Speed
Cost Savings
Ease and Consistency

To truly understand why this payment rail has these advantages, let’s take a quick look at what ACH actually is, who runs it, and how does it all actually work?

What is the automated clearing house (ACH) network?:
Automated Clearing House (ACH) network is a payment system operated nationally within the United States.

It’s administered by Nacha (formerly known as the National Automated Clearing House Association), which was formed in 1972 in efforts to begin digitizing payments and moving away from paper checks.

While Nacha makes the rules for ACH, the payments themselves are operated by two organizations.

The Federal Reserve
The Clearing House
Those Operators are the entities actually processing and routing transactions as they come in.

ACH payments can be used anywhere in the United States and are dependent on bank account credentials, rather than cards or wallets. You can set them up through your bank directly or by partnering with a third-party payment processor.

Once you have set it up, this payment method is very versatile. ACH can be used by consumers, businesses, and government organizations.Initially this network was used mostly for recurring transactions, but now transfers can be both recurring and one-off.

Certain financial institutions may also help you send money internationally while still using the ACH network. These international ACH transactions are known as IAT.

How does an ACH payment work?:

One common area of confusion with ACH or payment rails in general is the list of all the parties that could be involved.

While ACH is split into multiple types of payments, here are the common

definitions of who all the possible participants in an ACH transaction could be.

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