ACH Payroll Processing & Fedwire Blog

ACH Payroll Processing & Fedwire Blog

The History of ACH

Monday, June 27, 2016
The History of ACH

Companies have been utilizing Automated Clearing House payments for years to quickly, easily and safely transfer funds. Not only is this method efficient for businesses, but it’s effective for employees as well. Proper use of ACH can improve worker satisfaction over time, as the tactic makes the money available right away. Although 82 percent of U.S. employees are paid via ACH, according to a study from the National Automated Clearing House Association, many employers using the payment technique may not know the history behind it. Cachet has an inside look at how the direct deposit practice came to be so popular:

“Checks slowed down the payroll process.”

Checks as the starting point
For the longest time, payroll teams utilized paper documents to pay employees their earnings. Unfortunately, there were a lot of disadvantages to this method, as checks slowed down the entire process. As a result, a group of California bankers formed The Special Committee on Paperless Entries (SCOPE) – essentially the forefather of ACH – in the early 1970s to develop an automated payment system, according to Piracle. Their concern was the amount of checks being cleared on a regular basis and the inefficiency that came with that fact. The idea they conceived changed the field of payments forever.

ACH beginnings
The first ACH association was formed by SCOPE in 1972. This organization created a series of rules that outlined how electronic payments should operate in the future. From there, more and more ACH groups popped up around the country. Compliance across these associations was difficult, which caused a number of these organizations to join together to form NACHA in 1974.

NACHA developed their own set of initial rules, which would continue to be tweaked over time. The outcome of this first set of regulations, however, was direct deposit via ACH going into effect. The organization made serious strides in its first few years, and by 1978, two companies located on opposite sides of the country could transfer funds back and forth.

ACH has seen large growth over a relatively short period of time.ACH has seen large growth over a relatively short period of time.

Network expansion
The late 1980s through the 2000s brought a wealth of change to NACHA and turned it into the organization companies are familiar with today. The establishment of necessary associations paved the way for NACHA to flourish. The timeline is as follows:

  • 1987: The Payments Institute, NACHA’s educational program aimed at providing additional information regarding the payments industry for professionals, is launched.
  • 1990s: The Cross-Border Council and Internet Council are formed. These two organizations will later evolve into the Payments Innovation Alliance.
  • 2001: NACHA is reorganized. Federally insured depository financial institutions become direct members and internet- and telephone-initiated payments go into effect.
  • 2009: International ACH transactions become effective.

The ACH industry has seen a lot of change over a relatively short period of time. Due to these alterations, NACHA has become a trusted organization for completing direct deposit transactions via electronic transfer. In fact, payments have expanded from over one billion per year in 1988 to 22 billion in 2013, totaling over $36 trillion.

Companies have their work cut out for them when it comes to the payroll process. To make the procedure more efficient and effective for both businesses and their employees, organizations utilize ACH, especially for direct deposit. Since the method gives workers access to their earnings very quickly, ACH can improve overall satisfaction with one’s employer.

Contact us to learn more about the history of ACH payroll processing


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