Open Banking
May 16, 2023
5 Min

What is Nacha?


Making payments online is one of the most valuable and innovative tools for business and commerce today, especially as the world grows more digital every day. Still, you may wonder how exactly those payments get processed over the Internet and, even more importantly, how those purchases and exchanges of private information remain secure. 

ACH payments make e-commerce possible and are governed by Nacha. This article will give you a basic overview of Nacha’s meaning and impact so you know what happens to your money as a consumer or business owner.'

What Is NACHA and ACH?

Nacha oversees the ACH network and ensures that the network is being used properly and within regulation standards. The organization formerly went by its acronym “NACHA,” or National Automated Clearing House Association, but has since rebranded and now officially goes by “Nacha” as an association. Nacha primarily aims to govern ACH transactions and improve the nationwide payment system.

ACH, or the Automated Clearing House, is an American interbank fund transferring system allowing users to transfer from bank to bank. The ACH specifically relies on a batch processing system that keeps government and consumer use transactions completely secure. This process drives direct deposits and payments due to its ability to reach all U.S. banks and credit unions with the tap of a finger.

These electronic bank-to-bank transactions use the ACH network instead of card networks and can be categorized into two transaction types: direct deposits and direct payments. Direct deposits make deposits from businesses or governments to employees or consumers, and direct payments are funds used for making payments by organizations or individuals.

We all use Nacha ACH payment methods in our regular lives, including when we pay a bill online, get a direct deposit on payday, enjoy an electronic tax refund, use recurring payments, or use payment apps like Venmo or Zelle. This also means we benefit from Nacha’s involvement—the ACH is the technology that allows us to make those payments. At the same time, Nacha enforces any operating rules or regulations needed to keep our many ACH transactions secure.

Nacha History

Nacha is responsible for rules and standards governing money between accounts held at different financial institutions or payment companies, which started in the 1970s.  In 1974, several regional banking associations were brought together to standardize specific  banking processes. This led to the development of “automated” clearing house practices instead of using physical clearinghouses to exchange paper checks, which Nacha has overseen as an independent and essentially non-profit organization since 1985.

Nacha Compliance

Anyone who uses ACH payments, whether as a participating bank or consumer, has to follow the rules set by Nacha. This is especially essential for businesses that want the benefits of accepting Nacha ACH payments and failing to follow those rules can result in warnings and fines. 

Some fines can even get up in the $500,000 range in more severe cases, and if failure to comply with rules is a continued behavior, you can even be removed from the platform permanently. 

Losing out on half a million dollars can be detrimental to your finances, so some of the basic regulations and practices to keep in mind include the following:

  •        Get authorization from customers for one-time and recurring ACH debits. They must clearly indicate that they understand and are authorizing this transaction.        
  •        Provide notice if there is a change in the amount or date of a debit transaction.        
  •        Ensure that you correctly and thoroughly secure consumer bank information to initiate the transfer.        
  •        If someone cancels their subscription, quickly change their payments to stop making debits so you don’t wrongly charge them.        

Is Your Business Nacha Compliant?

Third-party vendors and senders are growing and influencing the nationwide payment ecosystem, which means Nacha compliance is more critical than ever. It’s also worth noting that Nacha constantly updates its compliance standards to keep up with technological developments and ACH payment methods, so your business needs to keep track of those changes. 

Staying up to date with relevant changes to payment processing and NACHA guidelines will make your business more competitive and keep you ahead of the game. Still, business owners wear many hats and don’t always know when or how to stay ideally caught up with the latest Nacha developments. 

When you use certain banking solutions, most Nacha compliance standards are built into the technology and systems that you use. As long as you keep up with the basics and use a trusted ACH payment solution, you can focus on your business with little worry.

Let Trustly Do the Heavy Lifting for Your Business

Trustly takes care of Nacha compliance so merchants can focus on what’s most important to them. Not only do we fully leverage the advantages of Nacha ACH payments, but we also ensure that you can easily follow Nacha standards.

Trustly is a Nacha Preferred Partner for online banking and account verification. In 2021, Nacha created data security requirements that explicitly require large, non-FI Originators, Third-Party Service Providers (TPSPs), and Third-Party Senders (TPSs) to protect deposit account info by rendering it unreadable when it is stored electronically. In this informative ebook, you can learn more about these requirements and how Trustly helps our merchants comply. 

Contact us today to learn more about our Open Banking-powered payments and how you can maintain compliance while lowering processing costs and improving approval rates. 

Stay in the know

Get exclusive insights and updates on all things Open Banking and Payments.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.

Relevant pages and resources

Financial Services
Open Banking
December 8, 2023
5 min
Using Open Banking APIs to Improve Business Processes
Open Banking
November 29, 2023
5 min
Pay By Bank vs Card: Cost Savings
Open Banking
November 15, 2023
8 min
The Power of A2A Payment Technology