The Automated Clearing House (ACH) is a system for transferring electronic funds, run by Nacha. This guide covers the basics of the ACH payments cycle and timing.

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ACH terms

Familiarize yourself with the basic entities involved in a Pay In ACH transaction.

  • Initiator: The initiator is a company or person who begins the ACH transaction process. In Payabli’s Pay In functions, the initiator is always a paypoint or the paypoint’s customer. ACH transactions must be authorized by the person or company being debited, either as part of the transaction or in advance of the transaction.
  • Third Party Sender - This is Payabli’s designation with the banking networks that allows us to manage transactions.
  • ODFI: The Originating Depository Financial Institution (ODFI) is a bank that accepts ACH transactions on behalf of the initiator. This is one of Payabli’s bank partners who manages our connection with the ACH network.
  • RDFI: The Receiving Depository Financial Institution (RDFI) is the bank that receives the request. These requests are usually a payment from a customer to a merchant, a settlement to a paypoint from an organization, or a settlement to a vendor from a paypoint.
  • ACH Operator: The ACH operator receives entries from ODFIs, distributes them to RDFIs, and settles the transactions.

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The ACH process

Here’s an overview of the basic ACH process for a Pay In transaction:

1

Initiation

Someone initiates the transaction, this could be a customer “crediting” a paypoint or a paypoint “debiting” a customer.

2

Payabli communicates request

Payabli (the Third Party Sender) communicates the request for funds to the ODFI.

3

ODFI processing

The ODFI receives the request and passes the request to the ACH operator for processing. The ODFI is one of Payabli’s partner banks.

4

ACH operator processing

The ACH operator processes the incoming and outgoing requests for many financial institutions and sends them to the recipient bank (RDFI).

5

RDFI processing

The recipient bank (RDFI) receives the request and begins processing.

  1. The request may fail for various reasons, such as insufficient funds or invalid banking information.
  2. If the funds for the transaction are available in account, they’re withdrawn and a line item appears in the customer’s bank statement.
6

RDFI response

The RDFI responds back through the ACH network with the funds or reject message.

7

ACH operator response

The ACH operator sends the message to the ODFI.

8

ODFI completion

The ODFI processes the message and credits the paypoint with the funds as requested. If the payment rejected, no funds will be passed and the paypoint may incur a fee for erroneously debiting an account.

9

Settlement

Payabli settles and transfers the funds to the paypoint.

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ACH processing times

The ACH network settles payments only when the Federal Reserve’s settlement service is open. The Federal Reserve’s settlement system operates on banking days from 7:30 AM to 6:30 PM Eastern Time, excluding weekends and federal holidays.

Here are some key terms used when discussing processing timelines:

TermDefinition
Transaction timeThe time the transaction occurred.
Transaction dayThe calendar day when the transaction occurred.
Batch dayThe day’s batch that the transaction is on for processing. Transactions made after the batch cutoff go on the next day’s batch.
Review daysThe number of days that the funds are held for review and monitoring.
Transfer dayThe calendar day when the instruction to send money is initiated. This can be any day of the week, including weekends and holidays. The transfer Day is calculated by adding review days to the batch day.
Fund dayThe day when Payabli receives confirmation from ODFI that the funds are on their way through the ACH system. This only occurs on banking days.

Important notes about fund day:

  • Treat the fund date as a confirmation that ODFI has sent the funding instruction to the ACH Operator and the money is on its way.
  • Fund date isn’t a guarantee that merchants have already received the money in their bank account. The amount of time it takes to move the funds between ACH Operator and the RDFI varies, depending who the RDFI is. For most banks and financial institutes the fund day is when the money appears as “Pending” or “Processing” in the merchant’s bank account.
  • ACH returns can happen after the fund day.

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Timeline examples with 0 review days

This table gives several examples of ACH processing timelines with a 0 day review period.

Transaction dayBatch dayTransfer dayFund dayNotes
MonMonMonTueRegular Week
FriFriFriMonNo processing on weekend
SatSatSatMonNo processing on weekend
SunSunSunMonNo processing on weekend
FriFriFriTueMonday is a bank holiday
SunSunSunTueMonday is a bank holiday

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Timeline examples with 2 review days

This table gives several examples of ACH processing timelines with a 2 day review period.

Transaction dayBatch dayTransfer dayFund dayNotes
MonMonWedThuRegular week
WedWedFriMonNo processing on weekend
FriFriSunMonNo processing on weekend
SatSatMonTueRegular week
SunSunTueWedRegular week
WedWedFriTueMonday is a bank holiday
FriFriSunTueMonday is a bank holiday

Although the fund day is typically the next banking day after the transfer day, it can take longer. It may take longer during high-volume periods, when the ODFI, ACH Operator, or RDFI experiences delays, or extended holidays. Check with your financial institution for the most up-to-date information about a specific transaction. If you have specific funding schedule expectations, reach out to Payabli to discuss.

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ACH returns

An ACH return is a message from the check writer’s bank that lets the ODFI (Originating Depository Financial Institution) know the ACH Network couldn’t make the deposit or collect funds from the receiver’s account (RDFI- Receiving Depository Financial Institution).

Learn more in the ACH Returns guide.

See Also:

Conceptual Guide: Payment Disputes

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