How,Does,ACH,Processing,Work,a ecommerce How Does ACH Processing Work?
Date:2020-12-29 How,Does,ACH,Processing,Work,a ecommerce
Wood handles are used in tools due to their ability to provide a good grip when holding the tool. Unlike many other types of handles; wooded handles are easy to grip do not transfer heat and are not an electrical conductor. Therefore, making
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Word Count= 326Word wrapped to 60 characters-per-linePlease feel free to publish this article in yourNewsletter or on your Web site (with Resource BoxIncluded)How does ACH processing work?ACH processing refers to the moving of money electronically usingthe Federal Government's Automated Clearing House. This clearinghouse provides a centralized communication network that allows for both the electronic transfers of funds and the reporting ofthese transfers.Essentially banks have a pipeline (usually called a Fed Line) that connects them directly into the ACH network. This pipelineallows information to be transmitted that instructs the clearinghouse to transfer funds to and from bank accounts. The bankstypically receive raw data reporting bank from the FederalReserve ACH system. (Note: There are private clearing housesas 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 havevery limited front end tools. By front end we mean methods ofgetting transaction data to them. Their reporting systems tendto be even more primitive.For these reasons third party processors (TPP's) entered the ACHarena. The third party processor saw the myriad benefits andopportunities to provide businesses the ability to easily movemoney electronically. By developing user friendly front end toolsand robust reporting the third party processor has been able tooffer businesses tools they need. The vast majority of TPP's have a partner bank(s) and they tie into that bank's Fed Line.If you are familiar with credit card processing you may assume ACHprocessing operates in a similar fashion. It doesn't. Whereby a credit card transaction places a hold on available credit on thecustomer card an ACH transaction is quite different.The ACH transaction proceeds as if the customer being debited hasa valid bank account with the requisite funds available. The TPPtypically receives provisional credit for the ACH transaction theday after the transaction is initiated. The two banks involved inthe transaction (TPP bank and customer bank) have up to 4 days to"settle" the transaction. Settlement refers to the banks agreementthat the money has been transferred.Most of the time the transaction is "settled". However there are a variety of reasons it may "reject" or become a "return". NSF, closed account, invalid account are some of the many reasons.You also have the potential (as in a credit card transaction) of a chargeback by the consumer.For the reasons detailed above the TPP typically imposes a 4 day hold on funds to mitigate the risk they would be exposed to if they gave faster credit. Here is a risk scenario. A business is credited $10k on Wednesday for transactions performed on Monday.Return information comes form the customer bank and the bottom line is that $5k was "returned". That $5k has to be debited from the business that initiated the transaction. If the TPP is unable to get that $5k they are on the hook. This goes to the heart ofrisk mitigation.In summary ACH processing is not an instantaneous transfer of funds.Most of the time you will find out through your reporting within 48 hours if the transactions is going to result in a "return". You can use our advanced verification products to reduce your exposureto potentially unsuccessful transactions. In conjunction with advanced recollection techniques you can enjoy efficient payment processing.If your business possesses an IT staff and sufficient transactionwe can in cases provide you a direct relationship with a bankwith a Fed Line. Contact us for details.©2004 by Wayne Akey
How,Does,ACH,Processing,Work,a
ecommerce
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