Payment Systems in US

Payment Systems in US

DOI: 10.4018/978-1-61520-645-2.ch009


As for the Retail payment system, the “Automated Clearing House” (ACH) handles small value payments in the US. The ACH is a nationwide electronic file transfer mechanism that processes the retail credit and debit transfers between the customer accounts. The Federal Reserve is the largest ACH operator in the US. Meanwhile, the TCH Payments Co. is a private-sector operator of ACH. As for the ACH payments, the settlements are made between the sending banks and receiving banks only on the next day of the processing on a net-basis. That means that the ACH is a Designated-Time Net Settlement (DTNS) system. The function of the “FedGlobal ACH” and “Financial EDI” capability on the ACH network is also discussed.
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The US is the largest economy in the world as well as having one of the world’s biggest financial markets. In addition, the US dollar (USD) still has its dominant role as a key currency, which is widely used in the international trade, global finance and investment, and as a reserve currency. This situation leads the massive flow of funds in the USD domestically and internationally.

For this reason, the US payment systems handle such a massive fund transfers of the USD within the nation and also between the US and foreign countries. Therefore, it is extremely important to obtain a detailed knowledge about how the USD payments are settled.

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