Or routing number, a nine-digit number used within the banking system to identify a specific financial institution. The number is used on checks and transactions pertaining to a specific financial institution so that they can be routed to the proper institution.

A unique number sequence assigned to a checking or savings account holder by a bank. This number represents their bank account.

The check conversion method in which paper checks received in the mail or through a lock-box location such as in remittance collection, are converted into electronic ACH debit payments.

A nationwide electronic funds transfer (EFT) system that provides for the inter-bank clearing of credit and debit transactions and for the exchange of information among participating financial institutions.

ACH is the method utilized to exchange (clear and settle) electronic transactions.

The Automated Clearing House is a secure, private electronic payment transfer system that connects all U.S. financial institutions. Direct paycheck deposits is one example of electronic fund transfers that process through this network.

Utilizing ACH payments is cheaper and faster than processing paper checks, both B2B (business-to-business) and B2C (business-to-consumer) e-commerce payment activities heavily rely on the ACH system and have helped give the system tremendous traction.

Agreement by a receiver to allow an ACH debit or credit entry to their account. While authorizations are traditionally made in writing, sometimes they may be presented orally or similarly authenticated by other means such as the use of a digital signature or pin.

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.

An organization that processes transactions between the originator and receiver. The Federal Reserve Bank and EPN (Electronic Payments Network) are currently the only two ACH operators.

The moving of money electronically by transmitting electronic data transactions using the Federal Reserve Banking system, transferring money between merchant and customer checking/savings accounts.

Carries additional payment related information for the entry detail record. These can be optional or mandatory depending on the SEC code.

The date upon which a transaction is authorized by the customer to take place. The merchant, as the originator of the transaction, adheres to this date in agreement with the customer.

Platform independent specifications for merchants to connect and transact with the a payment gateway via their own payment interface and reporting tools.

An agreement to allow an ACH debit or credit transaction to be applied one’s account. The authorization is required and can accepted in several different ways depending on the
SEC code or type of transaction. The customer allows a business to process payments through the ACH Network to be withdrawn or deposited from his or her bank account.

A written agreement allowing a business to debit or credit your account for payment.

Recurring transactions that are set to occur automatically. With one single entry, transactions will occur at the frequency and interval programmed or chosen for as long as the system is set to bill that customer.

Electronic check conversion method that allows merchants that receive checks collected at checkout lanes and registers to process them later in a centralized location, such as a back office, where they may be converted in a batch to ACH. BOC is the SEC code for this transaction type.

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.

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.

A credit or debit to a commercial or corporate account.

The process of converting a paper check into an ACH debit for payment. These debits are subject to the rules set forth by the National Automated Clearing House Association (NACHA).

A process used to determine if a customer has a history of issuing bad checks by comparing their account and/or identity information to a negative database.

A solution offered that combines check verification against the SCAN database with the ability to automatically void select declined transactions, allowing merchants to mitigate the risk to their business associated with rejected transactions.

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

Records(s) within an ACH file, which identify the originating entity of an ACH transaction(s) and the types of transactions within the batch being settled. This record also contains the effective date for all of the entries that are in the batch.

The entry of funds into an account. You pay someone and the funds are removed from your account and transferred into their account.

The 9-digit bank routing number of the customer’s bank.

The scrambling of sensitive information, such as account numbers or transaction information, to prevent unauthorized use. The Data Encryption Standard (DES) is the encryption format adopted by the financial industry and requires that information scrambling take place in a computer or terminal before transmission.

The removal of funds from an account. When someone pays you, funds are debited from their account to be placed into yours.

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

An ACH service that provides for the electronic transfer of funds directly into the account of a payee, usually an employee receiving pay or a Social Security beneficiary receiving retirement benefits.

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.

The transacting of business electronically vs. paper or manual/face-to-face methods.

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.

Banking in which funds are transferred through an exchange of electronic signals over a network connecting financial institutions, rather than the exchange of cash, paper checks, etc.

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.

An alternative to cash or paper checks for paying bills. Consumers can use PCs, telephones, or ATMs to send electronic transactions to their bank or bill payment provider to withdraw funds from their accounts and pay merchants.

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

The bank of the United States of America. The Federal Reserve loans and provides money to U.S. banking institutions and establishes national interest borrowing rates.

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.

Financial Institution(s)

The first record of an ACH file containing information for the purpose of routing, validating, and tracking ACH entries contained within the file.

The last record of an ACH file indicating the termination of information within the file. This is the end of data to be transmitted.

Any bank, savings and loan, credit union or other financial institution capable of both accepting deposits and making loans. These institutions are subject to national and state banking laws.

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.

The coded language format inserted in a file intended for display on a Web browser page. This code tells the Web browser how to display a Web page's words and images for the user.

An optical or magnetic device used by a merchant, which reads the MICR Numbers (routing/transit number, check number) encoded along the bottom of the check. This information is electronically read and stored, and then used later for electronic payment through the ACH Network.

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

The national organization that maintains the operating rules, standards, and procedures that govern all ACH activities and procedures.

An ACH return that indicates a receiver's bank account does not have the sufficient funds to cover a particular transaction.

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.

Office of the comptroller of the Currency - Charters, regulates and supervises all national banks.

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.

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 divison of the US Department of the Treasury.

These are transactions where the RDFI and the ODFI are the same financial institution. Instead of passing these transactions through FRB they can be passed directly to the partner financial institution.

Acts as the central clearing facility for ACH items. Also has the duty of delivering the ACH items to the RDFI.

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

A hardware or software module that adds a specific feature or service to a larger system.

The point where a transaction takes place, usually at a merchant’s store but can also include telemarketing (phone) and Internet sales.

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.

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

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.

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.

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.

Processor has received notification from the receiving bank that a particular debit was not processed successfully. An ACH entry that has been rejected and returned by the customer or receiver’s bank because it cannot be posted due to some reason determined by a given return reason code (See Return Reason Codes). Examples include insufficient funds (NSF), closed account, etc.

Also called Return Reason Codes, these are alphanumeric codes that represent the reason for a failed or rejected transaction.

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.

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.

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.

NACHA codes for returned or failed transactions.

The processor has received notification from the receiving bank that a particular credit or debit transaction was not processed successfully. An ACH entry has been rejected and returned by the customer or receiver’s bank because it cannot be posted, due to some reason determined by a given return reason code. Examples include insufficient funds (NSF), closed account, etc.

A check transaction that was presented for payment but could not be processed by the customer’s financial institution.

The re-presentment of a check via ACH that has gone through the check collection system and has been returned for non-sufficient funds or uncollected funds.

Any ACH transactions already processed but initiated by the customer to be refunded.

Also referred to as an ABA number, it is a nine-digit number used within the banking system to identify a specific financial institution. The number is used on checks, and transactions affiliated to a specific financial institution, so that they can be routed to the proper institution.

Statement on Auditing Standards #70 - 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.

See Standard Entry Class Codes

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

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

A cryptographic system that uses two keys to encrypt data − a public key known to everyone and a private or secret key known only to the recipient of the message. Both Netscape Navigator and Internet Explorer support SSL, and many Websites use the protocol to obtain confidential user information such as credit card numbers.

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.

A merchant’s statement, or summary of monthly charges, is viewable online and printable.

A service that permits customers to pay bills electronically and over the phone. The customer gives a company the authority to debit his or her account for a specific amount.

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.

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.

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.

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.

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

The receiving bank has notified the Processor that the transaction is no good. This is typically due to the amount of the check exceeding the amount in the customer’s account. No funding will be created for this transaction. Once a transaction is updated to uncollected a reject notification will be sent to the primary user on the account, and the information will be viewable on the reject report.

If a merchant does not want a transaction to be processed they can cancel, or “void”, the transaction. The transaction will still be searchable from the transaction search screen, but it will not be sent to the bank. This status, or action can only be taken when a transaction is in Risk Review, or one of the ‘received’ statuses.