What is ACH Payment Processing and What Does it Mean for International Banking?

International banking laws are hard enough to understand for people who have advanced degrees in economics. How does anyone else have a hope of keeping up? Basically, they don’t. This article is going to try to cut through the fog and help clear up some confusion regarding international banking, especially what ACH payment processing is, and why it is different between the United States and Canada. One of the ways working people can save money is by making sure they are taking advantage of ACH payments. Canada has a slightly different system than the U.S. and this article will touch on why. 

What is ACH and how does an ACH Payment Work?

ACH stands for Automated Clearing House, which is a network that exists in the United States for moving money between banks. It’s essentially the network used any time Americans select a debit transaction over a credit one. It’s also an essential network for business-to-business transactions, and companies that process payroll. This network is very popular because it is by far the cheapest option of transferring funds. It avoids high interest rates that are common with credit card companies as well as the exorbitant fees charged by banks for wire transfers. Anyone with a bank account in the United States can make or receive payments via ACH. 

The ACH payment processing system has two main categories of payments. First are direct deposits. This is what most people sign up for to ensure their paycheck is in their bank account first thing on payday. Second are direct payments. Every day, people use these direct payment systems to pay their bills. Businesses use this system instead of paper checks to pay both employees and perform business-to-business transactions. These transactions take about three days to be completed. This is because the banks collect each transaction, and then take the lump sum incurred and pay each bank at the end of the working day. 

Does the ACH System Work for Transactions with other Countries?

 The short answer is no. The long answer is no but, there are changes happening. Very recently the Canadian government has implemented a series of changes in their banking system. These changes are designed to make the Canadian system more open to other countries’ money, especially the United States. It makes sense since U.S. businesses are most likely to either expand into Canada or do business with Canadian interests.  Most countries have a closed banking system with laws regarding the transfer of funds between countries. They even have different names; American banks call them ACH payments. Canada calls them EFT payments or refers to the ACSS system but, this is all changing in real time. Because things are progressing so quickly, make sure you check and see at which point Canada is in their international finance revamp whenever you’re making payments to or receiving money from Canada.

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