ACH (Automated Clearing House): ACH is the foundational payment network in the United States, moving trillions of dollars annually between over 10000 financial institutions. Originally developed in the 1970s to replace paper checks, ACH was adopted nationwide by the federal government for social security expenditures. Nowadays, it supports everything from direct deposits, utility bills to payments from corporate suppliers. The system processes credit (“push”) and debit (“pull”) transfers in batches rather than real-time. Each transaction involves the initiator, their bank (ODFI), operator (such as the Federal Reserve or clearing house), and receiving bank (RDFI). The initiating bank is responsible for the legality of the transaction, especially in the debit scenario – therefore there is a 60 day consumer dispute window. The same day ACH launched in 2015 allows for faster processing, but still faces limitations such as transaction limits and lack of international coverage. Despite its age, ACH remains deeply rooted in the financial infrastructure of the United States due to its reliability, popularity, and relatively low cost ($0.21-1.50) compared to card networks.
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Telegraphic transfer: Telegraphic transfer is the backbone of high-value, time sensitive payments in the United States, mainly implemented through two systems: Fedwire and CHIPS. Fedwire is operated by the Federal Reserve and uses real-time total settlement (RTGS) to process transactions on a transaction by transaction basis, which is crucial for securities settlement and large corporate transactions. CHIPS is owned by major US banks and operated by clearing houses, serving fewer institutions and reducing liquidity requirements through net settlement. Most transfers are settled on the same day. Once a wire transfer is sent, it is usually irreversible, making it a reliable track for final settlement. For international wire transfers, banks typically rely on SWIFT, a secure global messaging network used by over 11000 financial institutions to transmit instructions rather than direct funds. Cross border payments supported by SWIFT are usually settled within one business day, but it depends on the intermediary banking chain. Together, they move trillions of dollars every day, supporting the global payment infrastructure.
Payment applications: Point to point payment applications such as Venmo and PayPal allow individuals to digitally send and receive funds within a closed network. Users need to create an account and log in to conduct transactions. These platforms provide a seamless, low friction user experience in developed markets, typically allowing free personal transfers through linked bank accounts or balances, with settlement times being instant or less than a day. However, cross-border payments are more complex, involving additional fees, currency exchange, and regulatory frictions. Although peer-to-peer transfers may be free, business-related transactions typically incur a fee of about 3%, which is attractive for personal use but high for merchants or commercial transactions.