ACH Payment Processing ? Working Fundamentals And Benefits

Posted by genedumas on June 7th, 2013

With the introduction of ACH payment processing, the headaches associated with business payments take an outright turn. ACH stands for Automated Clearing House. It is a nice and effective way to collect and receive payments. Using the ACH payment processing method, user can easily be able to receive as well issue electronic checks. It is definitely a very convenient method to handle all the payable and receivables. More importantly, clients and customers will definitely love the efficiency level of such a concept.

Let’s talk about the working fundamentals of ACH payment processing:

First, a customer purchases an item or even hires some services from the businessperson. Then, the customer will use the ACH check processing method to pay for the service or item. However, the electronic check can be processed only if the business owner/ originator allow the customer to agree to a series of statements for authorization of the check processing. Then, the e-check transactions are converted to Automated Clearing House transaction mechanism. But, it is extremely necessary to opt for authorization of the receiver. The entire ACH transactions are deposited to that particular financial institute which supports ach check processing. These institutions are often termed as ODFI (Originating Depository Financial Institutions).

The ODFI will then send the transaction to that particular financial institute where the customers have their personal checking account. Such institutes are often referred to as RDFI or Receiving Depository Financial Institution. The customer’s account will get debited for the purchasing done and then, the funds will be transferred to the acquiring bank. It is in this bank that the money will be transferred to the merchant account.

Many people have started using the ACH mode for payment processing purpose. Healthcare industries, property management firms, ecommerce sites, and credit card payment collection agencies are some that follow such an effective payment processing option. This type of a payment processing option is perfect for collecting dues and payments, paying taxes, paying consumer bills like rents, mortgages, and utilities, and also for direct deposition of payrolls. More and more businesses have set up an ACH payment option because of the convenience it offers in receiving payments for their goods and services. Think of how easy it would be to handle your receivables using this payment option. With the help of Ach, a person can be able to set up the recurring payments required for subscription related services. The automated system will totally take care of all the ongoing dues.