Electronic network for clearing payment orders (e.g., direct debits, credit transfers) between service providers in the domain of national and/or international payment transactions. Clearing comprises the electronic exchange (EDI) and the net settlement of payments. The clearing of orders is typically not carried out in real time (real-time processing), but at certain defined points in time (e.g., several times a day) and differs from the gross settlement procedure (RTGS). Originally, the ACH term was associated with the electronic processing of checks in the US, which required 3–4 days for the clearing and settlement of a payment order. Today the term is also used globally and the systems have become more efficient (typically payment processing until the next day, t + 1). An example of ACH payment are SEPA payments in Europe via the Step2 system, which uses the central bank accounts of the participating financial service providers in the TARGET settlement system. Providers of payment services in the fintech area access the services of an ACH via electronic interfaces (API) from their national ACH systems. In Germanspeaking countries, the German Central Bank, Swiss Interbank Clearing (SIC) and the Austrian National Bank, among others, operate as ACH. In Great Britain it is BACS and in the US, among others, the Federal Reserve Bank. Compared to the ACH approach with networked national hubs, more recent decentralized approaches based on distributed ledger technology (DLT such as Ripple) promise more real-time and less costly transactions. However, they still fall short in terms of scalability and feature substantially lower transaction rates (TPS).
More Term Definitions
- Algorithmic Trading/Algo Trading
- Ambient Intelligence
- Asymmetric Encryption
- Back-Office
- Alternative Trading Platform (ATP)
