ultimately it is the negotiated contract between distrusting parties, with all of its warts, right? CS people might really get a shock out of how daily systems "work"
All the clearing is (at least used to 10 years ago) done by manual SFTP transfers of transactions from one place to another.
This is how inter-bank communications are done. Another process verifies the transactions later and checks if they match up.
But yes, the process is archaic & simple with file drops, reads and processing.
Are they batched into some binary/serialized format that ships a collection of transactions that is then processed on the other system one at a time or literally shipped via individual network transactions and then executed individually? If it’s the latter that just seems wild.
They're specifically formatted ASCII text files[1][2].
A single file can have multiple batches. A single batch can have multiple transactions.
For example, a company may upload an ACH file to their bank for payroll that contains a single batch in it and in that single batch they have entries for each employee's payroll deposit. Or maybe it has two batches – one for payroll deposits and a second one for reimbursements (or bonuses) that get deposited separately. Maybe it even has batches for things like 401k transfers to custodian accounts.
Their bank may receive that batch file, validate that and combine those batches with all the other ones it has and send those as a combined file to the clearing house.[3]
That said, nothing stops you from transfer if a file with a single batch containing a single transaction. Such as when you need to initiate an immediate transfer instead of collating it with all the other transactions at the end of the day.
At the end of the day, the ACH network is just a bunch of text files being pushed to sftp servers and servers periodically polling for new text files in those sftp directories to pick up and process.
Somewhat off topic, but that reminds me, remember when a year or so ago there was some issue with a/some small banks failing, and every other post here and elsewhere on social media was constant alarmist fear mongering about how the entire economy was going down? And then nothing happened? If you were one of the people regurgitating such messages back then, have you learned anything from that experience?
Maybe a weird coincidence, but my automatic payment for prepaid cell in canada just failed for the first time in 5 years this week as well... seems like i just had to log in to the carrier, select a new plan and start payments again
Surprisingly, this explanation doesn't make me feel better about the problem. Is there some guy manually running batch jobs to keep everything going?