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Straddle 101 - Internal
What is ACH?
The Automated Clearing House (ACH) Network is an electronic payments network used by individuals, businesses, financial institutions and government organizations. It allows funds to be electronically debited or credited to a checking account, savings account, financial institution general ledger account or credited to a loan account.
The ACH Network is the backbone for the electronic movement of money and other related data, providing a safe, secure, reliable network for direct consumer, business and government payments. Large and small financial institutions of all kinds jointly govern and utilize the ACH Network, facilitating billions of payments such as Direct Deposit via ACH and Direct Payment via ACH.
The ACH Network is a same day, batch processing, store-and- forward system. Transactions are stored by financial institutions throughout the day and processed at specified times in a batch mode.
The ACH Network exchanges funds and payment-related information throughout the United States, its territories and internationally.
Understanding ACH Participants and How They Work in Straddle
Mapping ACH participants to Straddle roles: Originators as Accounts, Receivers as Customers, and intermediaries simplified for seamless ACH processing.
ACH transactions involve several key participants working together to move funds smoothly and securely. In Straddle, these roles are simplified into two main categories: Accounts (Originators) and Customers (Receivers). Here’s a quick and easy guide to how each participant maps into the Straddle system.
Glossary of terms and how we use them
Simplified Mapping in Straddle
Column 1
Column 2
Column 3
ACH Participant
Straddle Role
What It Means for You
Originator
Account
The business or person sending the payment.
Receiver
Customer
The person or business receiving the funds or being billed.
ODFI (Originating Bank)
ACH Facilitating Bank
Facilitates ACH file origination on behalf of the Account (Originator).
RDFI (Receiving Bank)
ACH Facilitating Bank
Handles final posting of transactions for the Customer (Receiver).
ACH Operator
Network Entity
Central clearing facility for transaction flow.
Third-Party Sender
Third-Party Sender
Entity transmitting files without direct Originator-ODFI agreement.
There are no rows in this table
Key Takeaway
In Straddle, we’ve simplified ACH workflows:
Whether you’re managing payroll, billing customers, or receiving funds, Straddle makes ACH easy to understand and use.
What does Nacha mean and is your business compliant?
Nacha was originally NACHA, an acronym for National Automated Clearing House Association. Though the acronym is no longer in official use (they go by ‘Nacha’ instead), it shows where the organization came from and the role they fill in the ACH ecosystem.
, regional banking associations across the US joined forces to standardize processes around the development of “automated” clearing house solutions—the digital replacements for physical clearinghouses where paper checks were once exchanged. By 1974, the American Bankers Association had centralized all of those regional groups under a national sub-division that they named NACHA.
An independent organization since 1985, Nacha is effectively a non-profit consortium tasked with:
What’s the difference between Nacha and ACH?
The Automated Clearing House (ACH) network is the American interbank funds-transferring system run by two national operators: The Clearing House and FedACH. Nacha is the governing body that oversees the ACH network. It ensures that member banks are aware of and compliant with related federal legislation, along with promoting development and education around ACH.
As for the operators that run the ACH network:
When an ACH transaction involves both a government account and a private account, the two operators work together to pass the corresponding data between themselves accordingly.
Nacha translates mandates from the US government into actionable rules and standards for The Clearing House and FedACH, which then operate their respective parts of the ACH network in accordance with Nacha’s guidance. Nacha also mediates between members and acts as an advocate for the ACH ecosystem to the larger financial industry.
Who do Nacha rules apply to?
is a living document that outlines binding rules for all 10,000+ members that collectively represent the overwhelming majority of retail banks and credit unions in America. The rules also extend down to all ACH network participants including payment processing partners like Straddle, businesses, and even individuals that use the ACH network.
In particular, businesses that collect payments over the ACH network have certain rules they must follow. businesses that originate online ACH debits must implement “‘account validation” as part of a “commercially reasonable fraudulent transaction detection system.” Essentially, this means that businesses must ensure that given account numbers are valid, the account is open, and it’s able to conduct ACH transfers—before initiating an online ACH debit. This new rule contributes to the greater goal of preventing fraud.
The intent of Nacha’s rules is to ensure that the ACH network remains an accessible and trusted part of America’s financial infrastructure.
“The Rules ensure that millions of payments occur smoothly and securely each day. The Rules direct how the ACH Network is operated, keeping it safe and efficient. The Rules standardize the roles and responsibilities of all parties using the ACH Network, ensuring that all ACH payments are handled on a level playing field.”
What are the main Nacha requirements?
The Nacha rules are a guiding framework for the ACH Network and include the basic obligations of each ACH network participant. According to Nacha, understanding the rules helps to ensure efficient payments, better risk management practices, and reduces chances of returns.
While Nacha charges a fee for its , the driving principles behind its rules and standards are:
Some of the main requirements and rules that follow these principles include:
Why is Nacha compliance important?
In the narrow sense, Nacha compliance is important because rule-breaking orgs will likely encounter more errors and returns in their ACH transactions and could get fined by the ACH network. In the larger sense, complying with rules and standards that are intended to ensure a safe and effective ACH network is good for all who participate in the ACH ecosystem—promoting its healthy use and sustainable growth.
There are two main drivers for staying compliant with Nacha rules and requirements:
Avoiding Downsides
If a business continually violates Nacha’s rules and causes high error rates, their bank may fine them and potentially discontinue their business relationship. Additionally, organizations relying on outdated processes that aren’t Nacha-compliant are also less likely to complete transactions without errors and returns; or effectively screen for fraud.
Promoting Upsides
Whenever an ACH network participant falls behind on the rules and standards, there’s going to be a resulting customer service failure. Some will be getting a worse-off deal than they ought to receive, while others might experience payment failure altogether.
Every bad experience with the system sours perceptions of ACH, which is bad for the ACH ecosystem as a whole. In contrast, every positive experience improves the system’s reputation, which is good for both adoption and consumer satisfaction.
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