What does ACH stand for in the payments context?

In the payments context, ACH stands for Automated Clearing House. This system is utilized for electronic financial transactions, enabling the transfer of funds between bank accounts through direct deposits, bill payments, and other forms of electronic money transfers. The ACH network facilitates the batch processing of these transactions, allowing for efficient and cost-effective movement of money, often used in payroll systems and recurring payments.

The term captures the essence of the system's function, which automates the clearing and settlement process, as opposed to manual or paper-based systems. This automation greatly enhances transaction speed and reduces the likelihood of errors. By using ACH, financial institutions can streamline processes that involve the transfer of funds, making it a crucial component of modern payment systems.