FinTech Glossary

Meaning

An Automated Clearing House (ACH) is an electronic network that facilitates batch processing of payments between banks, commonly used for recurring transactions like salary credits, vendor payments, and bill collections.

Business Context

In India, the equivalent infrastructure is the National Automated Clearing House (NACH), operated by NPCI, which enables bulk credit and debit transactions for payroll, dividend payouts, loan EMIs, and utility collections.

How It Works

Businesses submit batch payment files to their bank, which routes them through the clearing house for processing against beneficiary bank accounts. Transactions are settled in cycles rather than instantly, making ACH cost-effective for high-volume, non-urgent payments.

Why It Matters for Businesses

ACH-based systems reduce the cost and manual effort of processing large volumes of payments compared to individual wire transfers, making them ideal for payroll, vendor disbursements, and subscription billing.