The Story of NACHA

An Overview of a Subject That Can’t Be Covered In An Overview

NACHA Operating Rules

ACHs on the Network

The NACHA Story

The World of ACHs

Table of Contents

3rd Party Service Providers

The Electronic Payments AssociationThe NACHA Story

“…manages the development, administration, and

governance of the ACH network, the backbone for

the electronic movement of money and data.”

…in other words…

The NACHA Story

They make sure money gets

from Point A…

…to Point B safely.

A little background…

Back in the 1970’s, some California bankers started to explore the idea of

electronic payments.

A little background…Electronic payments require countless technical,

operational, and legal components.

So NACHA was formed to make electronic payments efficient and safe.

NACHA started holding conferences where key players could brainstorm

about how to make electronic payments

work.

“…through industry councils and forums, bring together

stakeholders to foster dialogue and innovation to

strengthen the ACH network.”

A little background…

NACHA’s territory

• NACHA Operating Rules

• ACH Network Enforcement & Risk Management

• ACH Network Development

At these conferences, they make the tough decisions that make up the…

So what is an ACH?A direct account-to-account payment

Consumer

Business

Government

Government

Business

Business

Business

Consumer

So what is an ACH?

• Paychecks• Deposits between two banks• Paying your utility bill, mortgage, or loans• Tax refunds and social security• Business-to-business payments• E-commerce payments

You can use an ACH payment for almost anything.

…they’re pretty popular.

The Growth of the ACH

2005 2006 2007 2008 2009 2010 2011 2012

10.0012.0014.0016.0018.0020.0022.0024.00

14.0016.00

18.00 18.20 18.76 19.40 20.20 21.00

ACH Payments Over Time(In Billions)

Source: https://www.nacha.org/ACHntwkstats

The Growth of ACH

• Much easier than writing and submitting a check

• Paper isn’t needed to carry necessary transaction information (Catch Me If You Can, anyone?)

It’s pretty obvious why ACH payments are so popular…

What is the ACH network?

The system that transfers ACH payments between financial institutions and

is governed by the NACHA Operating Rules.

What is the ACH network?

Basically, because there are so many ACH transactions made each day, they are

stored and processed all at once in a batch.

What is the ACH network?

The ACH Network is where all of the ACH

payments are “stored” until they’re ready to be

sent all at once.

What is the ACH network?

That’s where the NACHA Operating Rules come in.

With all these electronic payments floating around, the ACH Network has pretty tight

security…

NACHA Operating Rules• Govern the exchange of ACH payments

• Define the roles and responsibilities of financial institutions and other participants in the ACH Network (like small businesses…)

The Key PlayersOriginator:

Any individual, corporation, or other entity that initiates entries into the ACH Network

ODFI:

The ODFI (Originating Depository Financial Institution) that originates ACH entries at the request of and by agreement with its customers. They must comply with the NACHA Operating Rules.

RDFI:The RDFI (Receiving Depository Financial Institution) qualified to receive ACH entries that agrees to abide by the NACHA Operating Rules.

The Key PlayersReceiver:

An individual, corporation, or other entity that has authorized an Originator to initiate a credit or debit entry to a transaction account held at the RDFI.

ACH Operators:The Federal Reserve and Electronic Payments Network act as ACH Operators, central clearing facilities through which financial institutions transmit or receive ACH entries.

3rd Party service providers:An entity other than the Originator, ODFI, or RDFI that performs any function on behalf of the Originator, ODFI, or RDFI with respect to the processing of ACH entries.

What happens if I don’t follow them?

“The National System of Fines is the rules enforcement mechanism for the ACH

Network, correcting violation of and ensuring compliance

with the Rules through a formal system of warnings and

fines.”

NACHA Operating RulesThese are incredibly complicated, difficult, and you have to do

a whole lot in order to get them and figure them out.

This is an example of a NACHA

operating rule. Because of the

complexity, many opt to use a

3rd Party Service provider. They

become the experts so you

don’t have to.

Why use a 3rd party service provider?

A 3rd Party Service provider’s job is to know everything about NACHA Compliance so that you don’t have to.

Usually possesses a more intelligent ACH Processor with customized reporting

Most are internet based meaning no expensive software

Why use a 3rd party service provider?

Customization and graphically (GUI based) where banks are usually text based

Outsourcing compliance

Questions?

Leave them in the comments section

below and I will answer them

personally.

Stephen PriceCEO, E-Complish

LinkedIn

Image Credit• Slide 4

• http://www.freedigitalphotos.net/images/view_photog.php?photogid=2039 / Ohmega1982

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