The NACHA Automated Clearing House (ACH) network allows for digital payment transactions between banks. It uses a multi-step process where originating banks submit payment instructions to the ACH, which are then routed through the Federal Reserve or electronic payment networks to receiving banks. The ACH network is governed by NACHA rules and specifications regarding file formats, transaction codes, settlement types and other standards to facilitate electronic funds transfers.

1. Digital Payment System
NACHA Automated Clearing House
Fan Lu

2. NACHA Automated Clearing House (ACH) Process
Business Context Diagram
60% Federal Reserve
Banks
(FedACH)
ACH Transactions
Volume Split
Either Debit or Credit
40% Electronic
Payment Network
Live (EPN) Live
Prenote Return Prenote
Return Prenote
Zero $ Live Zero $ Live
ODFI RDFI
(Originating Depository FI) Bank Files Bank Files
(Receiving Depository FI)
ID: Routing Number DD Memo Files DD Memo Files ID: Routing Number
DD Posting Files DD Posting Files
GL Posting Files GL Posting Files
Report Files Report Files
OID: Account Number RID: Account Number
Payment Accounting Accounting
Instructions Advice & Payment Instructions Advice &
Reports Reports
Company Issuing Instructions
Originator Payee and Bank Account Info Receiver
Credit or Debit
Initiate ACH Amount
Receive Account
Transactions Schedule and Dates Debit or Credit Actions
Governed by NACHA
Governed by NACHA
Rules and Specification
Rules and Specification

3. NACHA ACH Interaction Diagram
Originator ODFI ACH Gateway RDFI Receiver
Payment
Instructions
Warehousing
Origination
Release
Receiving
(On Us)
Posting
Return
(Non-posted)
Return
Notice &
Payment Advice
Advice
Governed by NACHA
Governed by NACHA
Rules and Specification
Rules and Specification

4. NACHA Key Dates and Timeline
NACHA Key Dates and Timeline
Payment Credit Debit Effective Supplied
Instruction Release Release Entry Settlement
Date Date Date Date Date
Payment Instruction Date: The date of issuing payment instructions by
Originator
Credit Release Date: The date of ACH credit payment released to the ACH
network, which can be as old as 2 days before Effective Entry Date
Debit Release Date: The date of ACH debit payment released to the ACH
network, which can be as old as 1 day before Effective Entry Date
Effective Entry Date: The most common date used to distribute the originated
work
Supplied Settlement Date: The date Fed will post funds to RDFI’s bank
account with Fed
Governed by NACHA
Governed by NACHA
Rules and Specification
Rules and Specification

5. NACHA File Structure and Types of Transaction Records
Each Physical File contains 1 or many Logical Four Types of Transaction (Detail) Records:
Files 1. Return: No posted entry being returned
Each Logical File contains 1 or many Batches 2. Normal (Live): Standard and normal entry
Each Batch contains 1 or many Detail Records 3. Prenote: Memo posting entry
Each Detail Record may have 0 or 1 Addenda 4. Zero Dollar Live: Zero dollar entry, needed for
Record EDI data exchange
NACHA Logical File Structure (Bridged Version)
File
1 File ID Identification of Sender Identification of Receiver
Header
Batch Company ID and Description of Standard Entry Effective Entry Supplied
5 ODFI
Header Name Entries Class Date Settlement Date
Individual Addenda
Detail Transaction Individual Individual Trace #
6 RDFI Account Amount Record
Record Code ID Name of Entry
Number Indicator
Addenda
7 Additional Data IAT required Addenda Correspondent Addenda
Record
Batch
8 Batch control totals Dollar amount Item count Hash total
Trailer
File
9 File control totals Dollar amount Item count Number of batches Hash total
Trailer
ACH File is organized in multiple fixed length records of 94 characters
Governed by NACHA
Governed by NACHA
Rules and Specification
Rules and Specification

6. NACHA SEC (Standard Entry Class) Codes
Batch Record Level
PPD: Prearranged Payments and
ACK: Acknowledge Entry for CCD
CTX: Corporate Trade Exchange Deposit (Consumer Payment and
Payment
Deposits
ADV: Automate Accounting Advice DNE: Death Notification Entry RCK: Represented Check Entries
RET: Automated Returns (generated by
ARC: Account Receivable ENR: Automated Enrollment Entry
ACH)
ATX: Acknowledgement Entry for CTX
IAT: Cross Border ACH Entries SHR: Shared Network Transactions
payment
CBR: Corporate Cross Border MTE/SHR: Machine Transfer Entry
TEL: Telephone Electronic Debit
(obsolete and replaced by IAT) (ATMs)
CCD: Cash Concentration or PBR: Consumer Cross Border TRC/TRX: Truncated Entry and
Disbursements (DTCs) (obsolete and replaced by IAT) Truncated Entry Exchange
CIE: Customer Initiated Entries (home
POP: Point of Purchase WEB: Internet Initiated Entry
banking)
COR: Automated Notification of
Change and Automated Refused POS/SHR: Point of Sale Entry (POS) XCK: Destroyed Check Entry
Notification of Change
Governed by NACHA
Governed by NACHA
Rules and Specification
Rules and Specification

7. NACHA Transaction Codes (Trans Codes)
Detail Record Level
General
Account Type DDA Saving Loan
Ledger
Index 20 30 40 50
1 Credit Return 21 31 41 51
2 Credit Live 22 32 42 52
3 Credit Prenote 23 33 43 53
Credit Zero $
4 24 34 44 54
Live
6 Debit Return 26 36 46 56
57
7 Debit Live 27 37 47 (reversal
only)
8 Debit Prenote 28 38 48 not used
Debit Zero $
9 29 39 49 not used
Live
Transaction Codes are set up using offsets. For example, DDA has 20 as offset. Credit entry is between Governed by NACHA
Governed by NACHA
1 and 4 and Debit entry is between 6 and 9. Return, Live, Prenote and Zero $ are coded from 1 to 4. Rules and Specification
Rules and Specification

8. ACH Has Four Types of Settlement Entries:
1) Live, 2) Return, 3) Pre-notification, and 4) Zero Dollar EDI
Four Types of ACH Settlements
1) Live Entries 3) Prenotification Transactions
The live entries are the actual payroll or A prenotification transaction is a zero
debit entries that flow through the ACH dollar transaction submitted to the account
network and ultimately post to the account holder’s Receiving Financial Institution via
holder’s account. the ACH in order to notify this entity that
their customer has authorized an ACH
transaction to post to his/her account.
2) Return Entries 4) Zero Dollar EDI Transactions
Return entries are those transactions that NACHA has incorporated a separate set of
are sent back to the originating financial transaction codes to be used with EDI
institutions and/or originator after they types of transactions that include addenda
have failed to post at the receiving bank. records. These transactions have zero
dollar amounts but are still considered live
transactions (not prenotes).
Transaction Codes are set up using offsets. For example, DDA has 20 as offset. Credit entry is between Governed by NACHA
Governed by NACHA
1 and 4 and Debit entry is between 6 and 9. Return, Live, Prenote and Zero $ are coded from 1 to 4. Rules and Specification
Rules and Specification