Automated Clearing House (ACH)

An electronic network called an Automated Clearing House (ACH) is responsible for overseeing online banking transactions. The ACH network allows any entity (company, government agency, or person) to send or receive money. Employers frequently use direct deposits to pay their employees. 

It is an electronic platform used by banking institutions in the US to streamline financial transactions. More than 10,000 financial institutions are represented by it, and the over 29 billion electronic financial transactions made possible by ACH in 2021 amounted to more than $72.6 trillion.

The network primarily serves as a financial center, assisting individuals and institutions in transferring funds between bank accounts. Deposits and payments are included in ACH transactions, including:

  • B2B (business-to-business) exchanges
  • Government business
  • Consumer dealings

This is how the system functions. A debit or credit card issuer initiates a direct deposit or direct payment transaction utilizing the ACH network. The originating depository financial institution, commonly known as the originator’s bank, takes the ACH transaction and bundles it with other ACH transactions to be sent out regularly throughout the day.

Related Terms

Manage and Control Subscription Payments