The past year was full of new advances in the banking, insurance, and finance space. New technologies made transacting online easier and more convenient. The new year has brought with it a host of new fund transfer methods that are not just faster but more secure and offer a greater level of convenience from traditional fund transfer methodologies. Here is our list of preferred fund transfer methods that you should know about in 2022.
NACH
NACH is an online fund transfer platform that was introduced by the NPCI (National Payments Corporation of India) in the year 2015. NACH's full form is National Automated Clearing House. The purpose of NACH was to facilitate high volume interbank transfers. These were primarily for small to medium credit and debit transfers that were repetitive in nature. The NPCI service made it convenient to transfer small funds that were done electronically.
Types of NACH
The NPCI introduced two types of NACH transfers:
NACH Debit
Used for collecting recurring payments like utility bills, loan repayments, tax collections, insurance premium payments, and more. Payments can be set up through NACH with respective banks and financial institutions through a single debit transaction.
NACH Credit
Used by institutions to make recurring payments like salaries, income tax payments, pensions, and more. Respective institutions can make payments to banks and financial institutions by raising a single debit.
ACH (Automated Clearing House)
An ACH is essentially a bank transfer between two or more banks or financial institutions. Transfers are carried out on the ACH network. The transfers are processed through a batch system three consecutive times during the day, which is termed as an aggregate. Aggregate transfers take place only on workdays. ACH payments are very popular as bank transfers are done at a very nominal fee or sometimes even carried out free of cost.
Types of ACH
There are essentially two types of ACH:
ACH Charges Meaning
Banks and financial institutions change an ACH fee depending on the type of transaction. The ACH charges meaning will be made in different forms and appear on the statement in the following format:
Credit Fees:
All credit transactions of inbound direct deposits through the ACH network will see a credit fee. This fee is levied as part of the inbound transaction charge for receiving direct deposits into one’s account through ACH. The amount of charge depends on the respective bank. Generally, government banks levy lower credit fees when compared to private banks.
Debit Fees:
Like the credit fees, a debit fee is applicable for outbound transactions made through the ACH network. The debit fee covers debit transactions made towards and will ensure the transaction goes through successfully. Like credit fees, debit fees also vary between banks. Generally, government banks levy lower debit fees when compared to private banks.
Account Fees:
In addition to the transaction fees, banks and financial institutions charge account fees to operate the account. These account fees cover various services applicable for holding an account. Some examples of services include providing monthly statements, easy banking services like online banking, checks to avoid and resolve fraud, and more. Like the other ACH fees, account fees vary between banks. Generally, government banks levy lower account fees when compared to private banks.
Discount Fees:
A discount fee is a specific charge made to an ACH account for high-value transactions. These types of transactions are prone to high risk, and the discount fees are used to compensate for the requisite risks involved. Like the other charges, discount fees vary between banks. Generally, government banks levy lower discount fees when compared to private banks.
ECS (Electronic Clearing System)
Like NACH, ESC is used by organizations to make bulk transactions like payroll and employee income tax submissions. ECS fund transfers is a legacy fund transfer method that began in 2003 and was a popular method for organizations to send money across multiple accounts. However, there were a number of drawbacks to this method of fund transfer. It involves tedious paperwork, including a long-winded registration process that needed manual intervention. Due to its age and apparent drawbacks, ECS is gradually being replaced by NACH.
Conclusion
For organizations looking to make large transactions, the above mentioned will be very handy for individuals looking for a modern network. While deciding the fund transfer method, it’s important to look at various aspects like fees, application processes, and other important aspects of the account in question. Before you get started, it’s important to keep in mind your requirements and how the fund transfer method will make life easier while offering value to your organization.
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