ACH Glossary

ACH NETWORK
Funds transfer system governed by the rules of the National Automated Clearing House Association (NACHA) which provides for the interbank clearing of electronic entries for participating financial institutions.

BATCH UPLOAD
A means of submitting multiple transactions to a processor at one time rather than entering transactions independently. This allows you to skip the form entry, as ACH requests can be generated in another system and then uploaded in a single batch file for submission to the ACH Network for payment.

BATCH PROCESSING
A method of data processing and data communications transmission in which related transactions are grouped together and transmitted for processing collectively, usually by the same computer and under the same application.

CCD (Corporate Credit or Debit)
A credit or debit to a commercial or corporate account.

CLEARING HOUSE
An association of depository institutions that facilitates the exchange or clearing of checks and electronic items among its members.

DIRECT DEBIT
A debit made to an account for payment; generally refers to the electronic and direct method via ACH.

DIRECT PAYMENT
A method of payment collection used in the ACH Network for claims, generally those that are repeated over a period of time for which the customer gives a merchant an authorization to debit his or her account

EFFECTIVE DATE
The date placed on an ACH transaction by the merchant, the originator of a transaction. This is the date the originator intends the transfer of funds to take place between the banks. Any transaction submitted with an invalid effective date (weekend, holiday, etc.) will automatically be scheduled for the first available effective date to occur after the invalid date.

ELECTRONIC FUNDS TRANSFER (EFT)
A term used for whenever money is moved via ACH or wire transfer. This includes the transfer of funds initiated through a terminal, telephone, computer or magnetic tape for the purpose of instructing or authorizing a financial institution to debit or credit an account.

ENTRY
An electronic transaction representing the entering and transfer of funds in the ACH system. This may also be called a transaction, request, or payment.

FFIEC
Federal Financial Institutions Examination Council – The Council is a formal interagency body empowered to prescribe uniform principles, standards and report forms for the federal examination of financial institutions and to make recommendations to promote uniformity in the supervision of financial institutions.

FUNDING
The stage in the settlement process in which the merchant account is credited the funds from the transaction. The point in which the merchant is paid for their debit transaction.

NACHA FORMAT
The accepted and warranted ACH payment record format specifications provided by NACHA Operating Rules and Guidelines.

NOTIFICATION OF CHANGE (NOC)
Notification from a customer’s bank (receiver’s bank) indicating that the bank account information provided for a particular transaction is incorrect or includes information that is incorrect, and the correction of that information.

ODFI (Originating Depository Financial Institution)
The financial institution that receives payment instructions from the merchant or originator and forwards payment entries to the correct ACH operator. The ODFI may deposit items directly with an ACH operator or may operate through a third-party processor, which is the actual sending point.

OFAC
Office of Foreign Assets Control – Administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers and those engaged in activities related to the proliferation of weapons of mass destruction. A division of the US Department of the Treasury.

ORIGINATOR
Any individual or organization that initiates transaction entries into the Automated Clearing House Network. Usually, the originator is a merchant.

PPD (Pre-arranged Payment or Deposit)
An ACH debit/credit transaction classified as an automated consumer payment entry. This is usually in the context of a standing obligation, which debits or credits consumer accounts at their financial institution to satisfy that obligation. Some examples of PPD transactions are Direct Deposit of payroll or Direct Payment of charitable contributions or benefits. PPD is the SEC code for this type of transaction

PRE-NOTES
A zero dollar transaction sent before the first live transaction to test account information. These are optional.

RDFI (Receiving Depository Financial Institution)
The financial institution that is responsible for the receipt of ACH transactions. The RDFI may directly receive items from an ACH operator or may work through a third-party processor, which is the actual receiving point.

RECEIVER
Any individual or organization that has authorized an originator to initiate a transaction to their bank account. Usually, the receiver is the customer of the merchants.

RECURRING TRANSACTIONS
Transactions that are authorized by a customer to be submitted at regular intervals (i.e., weekly, monthly, quarterly, etc.) and on a predetermined basis. Recurring transactions may be programmed manually or established as auto-recurring. Manual entry requires that a transaction be entered for every interval to be charged. Auto-recurring only requires one entry, but the frequency must be established to set the payments to happen automatically after the time of entry.

REJECT REPORT
A report that lists rejected transactions based on the reject date of effective date. This will enable the merchant to see in one clear shot which customers they must take further action on to collect their funds. An emailed report is sent to merchants for any rejected transactions occurring on a particular day

RESERVE
An amount of funds a funding source holds in its account to cover potential payment defaults. After the agreed upon time period has passed, the funding source then rebates the reserve to the merchant less any fees or charges for delinquency.

RESERVE REPORT
If a merchant’s funds have not appeared on the funding report, then maybe the processor is holding the money. The reserve report will detail what transactions are being held, and how much money is due to the merchant.

RETURN REASON CODES
NACHA codes for returned or failed transactions.

SSAE16
Statement on Standards for Attestation Engagements No. 16- An internationally recognized auditing standard developed by the American Institute of Certified Public Accountants (AICPA). It is the authoritative guidance that allows service organization to disclose their control activities and processes to their customers’ auditors in a uniform reporting format.

SETTLEMENT
The transfer and accounting of funds between any two parties. Settlement is a daily occurrence.

SETTLEMENT DATE
The date on which a settlement occurred. This would be the actual date that funds officially changed hands.

STANDARD ENTRY CLASS (SEC) CODES
The three-character code within an ACH company/batch header, which identifies the type of transactions in the batch (e.g. TEL, ARC, RCK, etc.). This code is representative of these transaction types and often synonymous.

TEL
SEC Code that refers to a single transaction (non-recurring) that generates from a telephone payment.

THIRD-PARTY SERVICE PROVIDER
A provider of ACH services operating on behalf of the merchant or originator by processing ACH entries. The Third-Party Service Provider can create ACH files on behalf of the originator; act as a sending point or receiving point on behalf of the originating and receiving banks, etc. Third-party service providers can include data processors, correspondent banks, or any financial institutions that provides ACH services to other financial institutions.

TRACE NUMBER
A 15 digit number that is assigned to each entry detail record to uniquely identify it. The first 8 digits represent the ODFI for that transaction.

TRANSACTION
An ACH payment entry representing an advance or transfer of funds, purchase of goods or services, or any other debit/credit request initiated for payment between a business and a customer.

TRANSACTION REPORT
A report allowing the user to view any historical or future transactions submitted to the Gateway. The report provides a detailed depiction of the transaction, including current status, history, and customer’s information.

TRANSACTIONS CODE (TRAN CODE)
A 2 digit code that identifies whether the transaction is a debit or a credit and the account type (checking, savings, loan, GL).