subject: Ach Processors - What They Must Do [print this page] The automated clearing house is commonly referred to by its acronym, ACH. It is used to transfer funds electronically for payments including direct deposit, recurrent bills, loan and tax payments. E commerce also uses the system to facilitate their transactions. When a payment is made online or an e check machine is used, this system is at work. ACH processors are the link connecting the various elements of the system with each other. The network is overseen by a regulatory body called NACHA.
The process is made up of several entities. There are Receivers, Originators, Originating Depository Financial Institutions (ODFI) and Receiving Depository Financial Institutions (RDFI). The series of steps involved in a transaction consist of Receivers that authorize the payment or credit to be made and eventually ends in the payment being credited to a merchant or service provider. Between the start and end point, the transaction makes its way through originating and receiving financial institutions. This process is facilitated by ACH processors.
ACH processors face several requirements in order to do business in their industry. Qualifications must be met to establish a clearing account with and ODFI prior to processing any transactions. This is truly an industry within an industry. In addition to ODFI approval, some of the requirements to take on this type of status include having a significant amount of initial capital and having an infrastructure that will support the unique tasks of the endeavor. There must also be a substantial amount of accounting and technical knowledge and experience among staff members. This could involve additional training for current staff or the hiring of new members with this expertise.
ACH processors must also demonstrate a commitment to marketing. The product must be presented in a truthful and straightforward way to clients. There must also be a long range plan. This is not an industry to be taken lightly or for a short period of time. There may also be risks involved that are not initially apparent. NACH sets for the guidelines and regulations as does the government at the state and federal level. The industry is highly competitive and marketing costs may be high. There is the potential to fall victim to fraudulent activity. Those looking to become or to hire an ACH processor should do significant research about the industry to be certain their choice is a solid one.
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