International ACH

The Automated Clearing House (ACH) is an electronic funds transfer network that enables financial institutions, who participate in the ACH Network, and their customers to send electronic payments. The ACH originated in the United States and, today, there is one single clearing system for the entire nation. This clearing system allows every bank and financial institution to be connected to each other so that transactions and payments can be made quickly and inexpensively.

Not all countries have an ACH-like system and those that do use banking and payment formats that differ from what is used in the U.S. Recently, an International ACH Network was put in place to help businesses around the world connect with each other without overspending on oversea transactions. Before the International ACH was created, all international payments originating in the U.S. were sent to businesses in other countries as wire transfers or checks. Most of the time, businesses needed a foreign bank account to deal with foreign businesses. However, with an International ACH system, financial institutions in the U.S. can send ACH transactions without having to have a foreign bank account.

The biggest benefit of an International ACH Network is that any company who does business internationally will be able to save a ton of money on making transactions. Money is normally wasted on wire transfer fees and waiting for checks to be delivered. Companies who conduct foreign business may need to make International ACH transactions to customers, suppliers, employees and shareholders. The ability to make these transactions electronically are why an International ACH system makes conducting business with foreign entity's much easier and cost-effective.

Some other benefits of an ACH Network that extends overseas are:

1. Can improve the negotiation of terms with vendors and customers.
2. Can provide better cash flow options for businesses.
3. Can remove the many specific formats that must be used in order to deal with specific countries.
4. Can combine payment categories into a single payment file.

While there are many benefits of the international system that has been put in place, some areas still need to be worked out. Currently, there is no standard International ACH format. To deal with this, some domestic banks require a company to program a bank-specific format on their systems, while others accept a proprietary format from the company's ERP system.

Also, the file transmission requirements tend to vary for each country. The typical file transmissions currently in place in the International ACH system are: Secure File Transport (conducted over the internet), direct transmission (conducted over the internet or modem dial-up), treasury workstation, or through a banking system. Some countries cannot relay, through the electronic network, the necessary information that let's domestic businesses know the invoices were paid. So, in order to relay the information, alternative methods, such as mail, e-mail and fax are used. International ACH tracking is also available to offset any event in which a payment is not received.

The International ACH system is, currently, not a perfect system. It will take some time to develop. However, eventually and probably in a quicker amount of time than can be expected, the International ACH Network will become as prevalent and proficient as is the ACH Network in the United States. When that happens, the entire world will be financially connected and the history of the human race will forever be altered.