ACH Payments(NACHA/NACH/Direct debit System)
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ACH Payments(NACHA/NACH/Direct debit System)
- 1. ACH Payments - Automated Clearing House(DDS/NACHA/NACH) Surya Prakash Tripathi
- 2. The ACH Network is a batch processing, store-and-forward system. Transactions received by the financial institution during the day are stored and processed later in a batch mode. Rather than sending each payment separately. It also provides faster processing than paper checks, which must be physically handled. Instead of using paper to carry necessary transaction information, ACH transactions are transmitted electronically between financial institutions through data transmission. What is ACH Network Operation
- 3. ACH Transactions ACH Payment ACH Debit ACH Payment ACH Credit ACH PaymentACH Transactions
- 5. What is ACH Network Operation ODFI/Sponsor bank RDFI/Destinatio n bank Originator/corp orate/individual ACH Operator Fund movement in case of direct credit transaction Fund movement in case of direct debit transaction
- 6. ACH Debit Transactions RDFI ODFIACH Operator Seller In ACH debit payment, the seller “pulls” funds from the customer or buyer’s bank account for transfer to the seller’s bank account. Buyer bank Seller bank
- 7. Use Case 1 ACH Debit Bob wants to pay his mobile bill automatically which means on due date his account should get automatically debited with due amount. But why do you want to pay bill automatically You 1 Bob 2 I usually forget to pay bills on due date so I want to avoid this situation
- 8. Use Case 1 ACH Debit Ok but how would you do that? You 3 Bob 4 Through ACH network
- 9. Use Case 1 ACH Debit What is ACH network and Why to pay with ACH You 5 Bob 6 OK lets understand this concept
- 10. Introduction of ACH network(ACH Debit) ODFI/Sponsor bank RDFI/Destination bank Customer/Emplo yee/companyOriginator/corpo rate/individual ACH Operator 1 2 3 5 4 6 7 8
- 11. Authorization of Debit(Mandate) This can be given by using eMandate or paper based mandate or in any other digital way (typically varies country to country)
- 12. Why mandate is required for ACH Debit
- 13. Why ACH Network Some of the most popular reasons to use ACH debit are: • No need to remember to make payments. • Elimination of the risk of late payments. • Avoidance of late or interest charges through prompt, timely payments. • No need to write checks (which you'll have to re-order once they're gone). • Establishment of excellent payment and credit records. • No need to get payments in the mail and pay postage. • No need to wait for the postal service to deliver payments or worry about lost mail. • Easier to track payments since payee names appear on your bank statement or financial software. • More environmentally friendly (checks and envelopes use paper, and transporting them uses fuel). • Negligible processing charge compare to card and other payment modes.
- 14. ACH Debit examples SIP Payments Insurance payments Rentals Loan/EMI payments Charitable donations Utility bill payments Contributions to Individual Retirement Accounts
- 15. Quiz 1. In which direction fund movement takes place in ACH debit: a. Originator to Receivers b. Receivers to Originator c. A and B d. None of these are correct 2. Which instrument customer uses to give authorisation of debit in case of ACH debit payments: a. Cheque b. Demand draft c. Paper Mandate d. eMandate 3. Why does ACH operator send mandate files to RDFI a. To verify customers account details b. To check customers family details c. To check customers job d. To check account and customer details registered in the bank against the filled in details of mandate submitted by the Customer
- 16. ACH Credit Transactions ODFI RDFIACH OperatorBuyer In ACH credit payment, the customer or buyer “pushes” funds from the buyer’s bank account to a seller’s bank account. Buyer bank Seller bank
- 17. Use case 2 ACH Credit BOB has opened a software company of 50-100 employee and he wants to credit salary on predefined date with less processing charges and automatically. How will you do this many fund transfer in just 1 day You 1 BOB 2 I will go with ACH credit
- 18. ACH Credit What is ACH credit You 3 BOB 4 Ok let me explain you this
- 19. ACH Credit ODFI/Sponsor bank RDFI/Destination bank Employer ACH Operator 1 2 4 3 6 7 8 5 Employee
- 20. ACH Credit examples Interest Payment Social welfare payments Tax Payments Govt Vendor payments Dividends payrolls - private and government