OpenACH User Guide
Welcome to the OpenACH User Guide. This guide answers questions ranging from "What is OpenACH?" to "How can I use OpenACH?" and "Where do I start with OpenACH?" It even covers some of the most basic concepts of ACH, the terminology, and how to become an ACH originator with your local bank.
What is ACH?
Before diving into documentation with lots of acronyms that make absolutely no sense, we'll take a few moments to clear the smoke and simplify things.
ACH stands for "Automated Clearing House" and is a term that can be used very loosely in the banking and business industries. To quote Wikipedia, "ACH is an electronic network for financial transactions in the United States." That's pretty big. And in 2009, the scope of ACH was expanded to the world as International ACH transactions became a reality. The term ACH itself might apply to any part of the system, the system as a whole, a transaction inside the network somewhere, or even as a verb to describe the act of processing a transaction on this vast network. When people use the term, just pay attention to the context and you'll likely be able to figure out how they're meaning to apply it. For example, ACH files, ACH batches, ACH transactions or entries, ACH network, ACH originator, etc.
Speaking of Originator... What does that mean? Simply put, an originator is a business or organization initiating a transaction, either credit or debit. A third-party originator is a business or organization that initiates these transactions on behalf of another business or organization (e.g. a third-party).
NACHA is a term you might see or hear when people talk about ACH. It stands technically stands for National Automated Clearing House Association, though someone decided that was too confusing, so they just call themselves NACHA - The Electronic Payments Association. They are an organization that manages the development, administration, and governance of the ACH Network. Its a member organization, but to be absolutely clear, you do NOT have to be a member of NACHA in order to process payments through ACH. You can safely leave membership to banks and larger organizations that want to help manage the network itself.
ODFI stands for Originating Depository Financial Institution. Basically its a bank or a credit union through which a transaction is initiated (originated).
RDFI stands for Receiving Depository Financial Institution. It also is basically a bank or a credit union to which receives a transaction.
Lots of money travels over the ACH network - nearly $34 trillion in 2011 alone, spread out over 20 billion transactions! But for all that volume, the ACH network functions in a very simple way:
- An originator initiates one or more transactions (credit or debit), puts it into a NACHA-formatted ACH batch, puts that ACH batch in a file, and puts the file onto the network via an ODFI (typically this would be the originator's bank or credit union) by sending them the file.
- The ODFI then routes the transaction(s) in the file through the ACH network, and they continue to be routed up until they reach the appropriate bank.
- The RDFI receives the transaction and processes it, debiting or crediting a financial account accordingly. If they are unable to complete the transaction for any number of reasons (account closed, insufficient funds, etc.), the RDFI will send a return/change response transaction to the ODFI, letting them know what the issue is.
What is OpenACH?
So, you know the background about ACH, but what exactly is OpenACH?
OpenACH is several things:
- An open source (GPLv3) ACH payment platform, written in PHP using Postgresql
- An easy to use ACH payment gateway, using REST and JSON to put payments on the ACH network
- A BYOB (Bring Your Own Bank) ACH processing platform
- A third-party ACH originator, processing your payments on your behalf
- An ACH solution provider - we know how it works and can build exactly what you need
How can I use OpenACH?
To best determine how you can use OpenACH, first narrow down exactly what you want to do with ACH. Then look at the list in the section above, seeing which one best fits your needs.
One of the greatest things about the OpenACH open source ACH payment platform is that it is built with versatility in mind - something the list above should testify to. If all you want is software libraries that let you transform your data into NACHA files, you can use the core OpenACH NACHA libraries with your current software. If you don't care about mobile-enabled usability and simply want to use the REST/JSON API to push payments onto the network, you can do that as well. And if you simply need a easy-to-use, mobile-enabled interface to schedule your transactions, you can use the simple web front end to get the job done. Best of all, its 100% open source, GPLv3 license, free, free, free.
If you have no development expertise, or just don't want to mess with getting things set up on your own server, we can get you set up on our software-as-a-service (SAAS) hosted platform, either using your bank, or ours. Its simple!
Where do I start with OpenACH?
The easiest way to get started is to CONTACT US! We'll help point you in the right direction, and make sure you have the information you need.
- are interested in using OpenACH as your third-party originator
- already process ACH transactions and want to simplify or integrate systems
- have a need for developers who are forward-thinking ACH professionals
- need help figuring out how to spell ACH
Do it Yourself
If you are a do-it-yourself kind of person, feel free to look through our ACH Developer Guide to see how you can download, install and integrate with the OpenACH open-source ACH payment platform. And you can always contact us with questions. When you call or email OpenACH, you'll always be talking to people who know their way around every aspect of the system. Simple questions and technical questions are always welcome!
Becoming an Originator
There's lots of information out there about becoming an ACH originator. It usually sounds difficult, but its not. Here's what we recommend:
- Contact your bank and find out if they offer ACH origination services for processing NACHA files. (If they don't, we suggest checking with a larger bank such as US Bank or Wells Fargo.)
- Contact us to find out exactly how you will be able to use OpenACH to for processing ACH transactions through your bank.
- Fill out the paperwork with your bank - every one is different. Keep in mind that they'll probably want to see your financials.
- Use your new origination account with either the open source OpenACH platform, or BYOB (Bring Your Own Bank) to the hosted OpenACH software-as-a-service (SAAS).