What is Automated clearing house? | Meaning & Definition | Akrivia HCM

An automated clearing house( ACH) is an electronic interbank payments system in which participating banks exchange transactions electronically, eliminating the need for paper transactions and speeding up the settlement process. 

The ACH system processes batches of payments containing multiple transactions and charges low fees to encourage its use for low-value payments.  

ACH facilitates the settlement of credit and debit transactions that originate in batches, such as direct deposit payroll payments and payments by Direct Debit. In principle, any batch item can be settled individually or batched for settlement, but certain time-sensitive applications, such as U.S. payrolls, are usually paid in batches. 

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