ACH Network is the National Automated Clearing House (ACH) for electronic funds transfers. It processes financial transactions for consumers, businesses, and federal, state, and local governments. ACH processes large volumes of credit and debit transactions in batches. Short for "Automated Clearing House", ACH credit transfers include direct deposit for payroll, Social Security and other benefit payments, tax refunds, and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills.

The rules and regulations that govern the ACH network are established by National Automated Clearing House Association (NACHA). In 2018, the network processed 23 billion transactions with a total value of $51.2 trillion.

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Available in Unified API

TabaPay ACH is available via both our Unified API as well as via file-based exchanges.

For more information please look at our ACH via API guide.

Want to get enabled for ACH in Unified API? Email [email protected]

How ACH Payments Work

For each ACH payment from a payor's bank account to a payee's bank account, there are effectively two ACH transactions created and transmitted, namely an ACH Debit transaction and an ACH Credit transaction. In the case of a payor and payee having an account at the same financial institution (FI), there is only one ACH transaction, which is often called an "on-us" transaction.

ACH Debit transaction

The payee's sending institution creates, batches, and transmits an ACH Debit transaction to the payor's receiving institution. The ACH Debit transaction instructs the receiving institution to withdraw and transmit the funds from the payor's bank account to the sending institution.

The receiving institution must send the return to the sending institution by the end of the following business day if it is unable to debit the funds from the payor's account. For example, if the account was not found, the account was closed, or the account was frozen.

For an ACH Debit transaction, the sending institution may be a third-party bank, rather than the payee's bank.

ACH Credit transaction

The payor's sending institution creates, batches, and transmits an ACH credit to the payee's receiving institution. The ACH Credit transaction instructs the receiving institution to credit the funds to the payee's bank account.

The receiving institution must send the return to the sending institution by the end of the following business day if it is unable to credit the funds to the payee's account. For example if the account was not found, the account was closed, or the account was frozen.

For an ACH Credit, the sending institution may not be a third-party bank, rather than the payor's bank.

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Same Day vs Next Day

There are two types of ACH settlements.

Next-day ACH

ACH debits and credits are transactions that are created, batched, and transmitted typically by way of a financial institution's connection to the ACH Network.

With next-day ACH, each ACH transaction is cleared overnight. The sending institution (called the Originating Depository Financial Institution) sends the transaction to the receiving institution (called the Receiving Depository Financial Institution). When the receiving institution receives the transaction, it has until the end of the next working day to send a rejection to the sending institution. If the sending institution does not receive a return from the receiving institution by the morning of the third business day, then the transaction is deemed to be successful.

Same-day ACH

With same-day ACH, settlement can happen the same day. The sending institution can transmit files to the receiving institution the same day, expediting the processing of ACH transactions. The receiving institution still has two business days in which to send a return, so there will still be a delay of two business days in same-day ACH debit transactions. On the other hand, ACH credit transactions can be credited on the same business day as along as the receiving institution receives the ACH transaction within the correct window.

Transactions exceeding $1,000,000 and international transactions are not eligible for same-day ACH.

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API Integration

For how ACH API integration works, refer ACH via API

ACH Files

Refer to ACH File Overview by NACHA to understand ACH file formatting.

File Details

File sharing details will be provided to the client

• yyyymmdd=file date
• N=sequence number (1..n) if multiple files per cycle used
• A=file modifier (A..Z)
• For ISO, do not use the MID
• Comma separator for each field

Note: The Processed File Name is not a final status or final completed file.

Input files

• Merchant deposits input file(s) into the file sharing tool.
• All input files since last batch are processed.
• TabaPay moves Input files to 'Inboxprocessed' after processing.
• Email to [email protected] with copy to [email protected]: subject: NAME ACH; total debits and $s, total credits and $s
• Cut-off times:
  • File based -> Same day: 7:00 AM PT; Next day: 5:30 PM PT
  • API -> Same day and Next day: 12:00 PM PT (Same window)
• File cutoff missed will be moved to next window
• Confirmation of processing email to merchant
• TabaPay output files, processed files, return files:
• Merchant Pickup return files, Processed files, and Output files in the 'Outbox'
• Processed file delivered within minutes of ACH files being processed by bank; One file for each merchant batch.
• Output file delivered next business day; same format as Processed file - with Trace ID and processed time from bank

Guidelines

• All files received prior to same day cutoff are processed as same day, otherwise processed as next day.
• ISO+MID assigned by TabaPay.
• CompanyName, CompanyID assigned by TabaPay.
• IIN must be unique by CompanyName, CompanyID as traceIDs and returns provided by IIN. For Person-to-Person WEB credit Entries, this field is required and contains the name of the consumer Originator. For WEB debit Entries, this field is optional, and is used at the discretion of the Originator.
• Offset account is always merchant's DDA at ODFI. Option to include offset records (default is no offset).

Explanation for each file

There are 4 files associated with ACH.

1. Input file -> this file is generated by the merchant and contains the transaction requests.
2. Processed file -> this file is generated by TabaPay. It indicates that transactions that have been sent to the bank.
   1. Status: Processed -> Transaction has been sent to the bank.
   2. Status: Rejected -> Transaction was rejected, status codes below.

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Processed File Is Not a Completed File

A processed file that is generated by does not indicate the payment has been completed, but only that the transaction has been sent to the bank.

3. Output file (Conditional) -> This file is generated by some banks to let us know when the transaction was sent to the Fed. This file has the exact same format as the Processed file, and will include the Trace ID from the Fed. Might take up to 2 days to be sent.
4. Return file -> This file contains a list of returned transactions. Can come back 6 to 7 days later.

SFTP Push. TabaPay pushes ACH files via SFTP. Security options can include:

1. Merchant whitelists TabaPay IP
2. SFTP ID and Password
3. TabaPay public key for SFTP security (ID or ID+PW)
4. File encryption using Merchant public PGP key

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ACH Request

Refer to ACH API for fields in the API request. View the following file format option for ACH file requests, or view a NACHA file format.

For file based format refer to ACH File Exchange

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ACH Response

As a response, you will receive the ACH Processed file after the files are processed by the bank. This is not a final status.

Response and Processed File Format

ACH Response File Sample

To zoom in for smaller table values, pinch out on your trackpad. For an Apple Mac, type CMD and the plus sign (⌘ and +). For PC, use CTRL and +.

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ACH Returns (Includes "Rejects" and "NOCs")

The ACH Return files are shared after payments are returned to original sender and can be shared 6-7 days after the payment return.

ACH Return files are sent to merchants/clients after the bank shares the ACH payment is returned.

ACH Return File Format

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ACH Return Codes

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TabaPay Response Codes

Notification of Change (NOC)

A Notification of Change (NOC) is just a heads-up that there’s a small update needed for a customer’s bank account info, like the account or routing number. It’s sent by the customer’s bank to notify you to update their records.

When you get an NOC, there's usually no major action needed—your ACH payment should still go through. The key thing is to update the customer’s info to avoid any issues with future payments.

1. Receiving Depository Financial Institution (RDFI): The recipient's bank detects the issue with the payment details and sends an NOC to the sender's bank.
2. Originating Depository Financial Institution (ODFI): The sender's bank receives the NOC from the RDFI and passes it along to you, or the payment service provider to update the ledger.
3. Payment Service Provider, or Sender’s Organization: The initiator of the ACH payment, such as a business or organization that is sending the funds, receives the NOC. They must update their records to correct any mistakes in the customer's bank details to ensure future payments are processed accurately.

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Updating Customer Records

In most cases when you receive an NOC, your ACH transaction should still process as expected.

After receiving an NOC, you will need to update your customer records to reflect the change to their account and ensure that future ACH transactions can be processed correctly.

Refer to the National Automated Clearing House Association (NACHA) Operating rules and Guidelines for more information.

NOC Correction (COR) Codes

Clients receiving a NOC Class = COR must incorporate the change (e.g. C04 - account name change).