How Does ACH Processing Work?
ACH processing refers to the moving of money electronically using the Federal Government’s Automated Clearing House. This clearing house provides a centralized communication network that allows for both the electronic transfers of funds and the reporting of these transfers. Essentially banks have a pipeline (usually called a Fed Line) that connects them directly into the ACH network. This pipeline allows information to be transmitted that instructs the clearing house to transfer funds to and from bank accounts. The banks typically receive raw data reporting bank from the Federal Reserve ACH system. (Note: There are private clearing houses as well). Most banks possess at least the ability to use a Fed Line. Some make use of this and some don’t. Those that do typically have very limited front end tools. By front end we mean methods of getting transaction data to them. Their reporting systems tend to be even more primitive. For these reasons third party processors (TPP’s) entered the ACH
