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An automated clearing house network (ACH network) is an electronic network for the automatic batch processing of financial transactions.
ACH networks simultaneously process very large numbers of credit and debit transactions. The primary purpose of ACH networks is for making electronic direct deposits or money transfers. They are considered the backbone of the electronic movement of finances and financial data.
An automated clearinghouse network may also be referred to as simply an automated clearing house.
Techopedia Explains Automated Clearing House Network
The ACH network is in place to automate the large-scale processing of automated payments. This has a number of functions, including:
- Payroll deposits
- Government-issued payments such as Social Security
- Regular payment debits, such as payments for rent, loans, household bills, mortgages etc.
- Business-to-business payments
- E-commerce transactions
- Federal, local, state tax, and other contributory payments
- Internal transfers between banks
A survey released in 2011 by Ecom Advisors found that only 34 percent of businesses with between two and 100 employees used direct deposit. The study suggested that despite the widespread use of ACH networks there continues to be a market for small businesses, while medium and large businesses already use ACH networks to a much greater extent.
