ACH payments cycle

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.

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 typically 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.

The ACH process

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

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:

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.
• 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.

ACH timeline calculator

This ACH timeline calculator helps you understand how the transaction day, batch day, hold days, transfer day, and fund day work together.

Timeline examples with 0 hold days

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

Timeline examples with 2 hold days

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

Timeline examples with 5 hold days

This table gives several examples of ACH processing timelines with a 5 day hold period.

Advanced funding and settlement timing

With advanced funding (also called accelerated funding), Payabli funds a paypoint before the ACH return window has fully closed. This shortens the time to funding, but it also means a return can arrive after the paypoint has already been funded.

The hold period sets how much buffer exists to absorb returns before a transfer goes out. A longer hold lets more returns settle before funding, so fewer arrive after the transfer has been sent. A shorter hold, such as a 1-day hold, funds faster but leaves a larger share of returns unresolved. To reduce the risk of returns arriving after funding, Payabli offers longer hold options, such as 5-day or 7-day holds, that absorb more returns first. Use the ACH timeline calculator to see how different hold periods shift the transfer and fund days.

If a return arrives after the paypoint has been funded, Payabli must recover those funds. Until the paypoint’s available balance covers the amount, settlement of the affected transfer can be delayed or held. The transfer goes out once the balance is restored, either as the recovery completes or as new transaction volume builds the balance back up. There’s no fixed timeline for this, so avoid quoting a specific funding date while a transfer is held.

Payabli doesn’t learn about returns in real time. Return notifications arrive in an overnight batch, so a hold can appear sooner than the typical return timeline would suggest. Available balance is tracked per paypoint, so a shortfall at one paypoint doesn’t hold transfers at other paypoints in the same organization.

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.