What Is Nacha?

Nacha is the steward of the electronic system that connects all U.S. bank accounts and facilitates the movement of money among them. The organization says that $55.8 trillion moved through its Automated Clearing House (ACH) Network in 2019.

Previously known as the National Automated Clearinghouse Association, Nacha is a non-profit association that is funded by the financial institutions that use its network. Nacha and the Interactive Financial eXchange (IFX) Forum merged in 2018, an international industry association that develops specifications for financial data systems.

Key Takeaways

  • Nacha operates one of the major networks that carries electronic financial transactions between banks and payments services providers.
  • It is responsible for the rules and standards that are used to move money between accounts held at various types of financial or payments companies.
  • Nacha is a non-profit association funded by U.S. financial institutions.

Understanding Nacha

The ACH network enables billions of electronic financial transactions, including direct deposits, Social Security and government benefits statements, electronic bill payments, person-to-person (P2P), and business-to-business (B2B) payments. 

Nacha merged with the Interactive Financial eXchange (IFX) Forum in 2018.

Through its supervisory and rule-making functions, Nacha provides the foundation for electronic payment systems to operate effectively, while working to update technologies and implement new payment systems.

History of Nacha

Nacha was created in 1974 with the merger of several regional bodies. It was originally part of the American Bankers Association.

It has been instrumental in the development and standardization of such innovations as direct payroll deposit, electronic benefits deposit, and automated credit card transactions.

More recently, it has taken over the task of enabling the processing of B2B health insurance payments under the 2010 Affordable Care Act. Nacha now administers the Healthcare Electronic Funds Transfer (EFT) standard supports HIPAA-compliant transactions between health plans and providers that allow for information to travel with the payment, simplifying accounting procedures for providers.

The ACH Network

The ACH Network connects all U.S. financial institutions through a ubiquitous payment system that is built to securely and efficiently move money and information from one bank account to another.

Nacha develops rules and codes of business practices and is involved in the development of new applications. It also institutes and monitors quality- and risk-management controls.

Although it is not a government agency, Nacha works closely with various government agencies including the Federal Reserve, U.S. Treasury, and state banking authorities in order to ensure the integrity of the electronic payments systems used by U.S. financial institutions.

In 2014, Nacha formed the Payments Innovation Alliance as a voice for the payments industry and the ACH Network. The Alliance consists of hundreds of companies and organizations across the global payment ecosystem. It offers discussion, debate, education, and networking on such topics as payment system modernization, trends, standards, security, and ongoing innovation.

Text reads: "Examples of ACH Transactions: direct deposit of your wages; automatic payment of recurring bills such as energy bills, insurance premiums, and homeowners association dues; moving money from your brick-and-mortar bank to your online bank; payments from businesses to vendors and suppliers"
Image by Catherine Song © The Balance 2020

Faster Payments

In November 2019, Nacha unveiled an initiative called the Faster Payments Playbook that aims to allow consumers to "pay anyone, anywhere, at any time with near-immediate funds availability."

Nacha also provides services in education and accreditation; industry engagement with financial institutions, businesses and government; and advocacy resources.

Nacha’s API Standardization Industry Group (ASIG) supports the advancement and use of standardized Application Programming Interfaces (APIs) within the U.S. financial services industry.