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What is a Settlement ?

SETTLEMENT – The process of accounting for transactions processed through the ACH operator. Settlement occurs daily.

Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit, payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills. Debit transfers also include new applications such as the point-of-purchase (POP) check conversion pilot program sponsored by the National Automated Clearing House Association (NACHA). Both the government and the commercial sectors use ACH payments. Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.

ACH is a computer-based clearing and settlement facility established to process the exchange of electronic transactions between participating depository institutions.

Rules and regulations that govern the ACH network are established by NACHA and the Federal Reserve. In 2015, the network processed nearly 24 billion transactions with a total value of $41.6 trillion. Credit card payments are handled by separate networks.

The Federal Reserve Banks, through the Fed ACH system, are collectively the nation’s largest ACH operator. In 2005, they processed 60% of commercial interbank ACH transactions; the remaining 40% was processed by the Electronic Payments Network (EPN), the United States’ only private-sector ACH operator. EPN and the Reserve Banks rely on each other for the processing of some transactions when either party to the transaction is not their customer. These interoperator transactions are settled by the Reserve Banks.

ACH billing tends to have lower transaction fees

In most cases, ACH transactions are less expensive for merchants than credit and debit card transactions if the processor is charging a flat transaction fee.

The larger your average ticket, the more the savings.

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