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What is a PARTICIPATING DEPOSITORY FINANCIAL INSTITUTION ?

PARTICIPATING DEPOSITORY FINANCIAL INSTITUTION – Any DFI that is authorized by the ACH operator to originate or receive ACH entries.

A financial institution that participates in the Automated Clearing House Network (ACH) with specific authorization to initiate and accept ACH credit or debit entries. Credit transactions may be authorized verbally by ACH, but debit transactions require prior written authentication. DFI participation in the ACH network is critical to the efficiency of the interbank clearing of electronic entries.

Originating Depository Financial Institution or ODFI is a banking term in the United States used in connection with Automated Clearing House (ACH). In the ACH flow, the ODFI acts as the interface between the Federal Reserve or ACH network and the originator of the transaction. The ODFI warrants to the ACH network that the transactions it transmits to the network comply with the rules. The depository institution that is a member of ACH is usually a bank or other financial institution which is initiating a payment on behalf of its client.  This is different from check processing in which the paying bank on which the check is drawn warrants that the transaction is in compliance.

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