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Definition: Automated Clearing House
ACH is an electronic clearing house that provides easy transfer of money. This transfer may be for any of the purposes – payroll, tax refunds, insurance premium payments, etc between the depositors. The ACH is used in cases where there are large volumes of debit and credit transactions through computer based clearing and settlement facility.
In United States of America, ACH is monitored by National Automated Clearing House Association (NACHA). ACHs are credited to establish faster and more efficient transfers of governments as well as businesses.
ACH uses batch processing and store-and-forward system to move almost $39 trillion worth of transactions each year in United States alone. The Federal Reserve Banks use the FedACH system while there is Electronic Payments Network (EPN), a private sector ACH operator that is also used. Transactions between EPN and FedACHs are settled by the Reserve Banks.
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