The Automated Clearing House (ACH) Network is a processing and delivery system that provides for the distribution and settlement of electronic credits and debits among a large number of financial institutions. The financial industry developed the ACH Network as an electronic alternative to paper checks. The most common types of ACH transactions are direct payroll deposits and direct billing drafts. Corporations, however, may also create ACH transactions to move funds among their own accounts or to exchange payment-related information with their trading partners. While both corporations and financial institutions can create transactions, only financial institutions can submit transactions directly into the ACH system. Therefore, corporations must use financial institutions (DFIs or FIs) as gateways to the ACH Network.
Organizations creating ACH transactions are called Originators because they originate electronic transactions on behalf of customers and/or employees (Receivers) who have authorized them to do so. Financial institutions that accept Originators' electronic transactions, and submit them into the ACH Network, are called Originating Depository Financial Institutions (ODFIs). ODFIs forward their Originators' transactions to an ACH Operator, and the ACH Operator, in turn, sends the transactions to their Receivers' financial institutions, called Receiving Depository Financial Institutions (RDFIs). RDFIs finally either post the transactions to the appropriate Receivers' accounts or return them to their respective ODFIs as unpostable.