Hands up if you remember Abbott & Costello.
There certainly are a bunch of us. I am a huge fan myself. And nothing illustrates my next point like the classic Who’s On First? skit… here’s a little snippet.
Costello: Well then who’s on first?
Abbott: Yes.
Costello: I mean the fellow’s name.
Abbott: Who.
Costello: The guy on first.
Abbott: Who.
Costello: The first baseman.
Abbott: Who.
Costello: The guy playing…
Abbott: Who is on first!
Costello: I’m asking YOU who’s on first.
Abbott: That’s the man’s name.
Costello: That’s who’s name?
Abbott: Yes.
Costello: Well go ahead and tell me.
Abbott: That’s it.
Costello: That’s who?
Abbott: Yes.
It goes on and on…a classic, repeated over a 1,000 times on the radio and numerous times on TV.
It’s clear to those of us ‘in the know’ that Who is in fact on first base, but poor Lou, he was lost from the get-go.
It can be just as confusing trying to figure out who’s-who in an ACH transaction. I don’t know enough about baseball to make the analogy, but I can at least break it down for you and show you, well, Who’s on first.
There are 5 main parties to every ACH transaction; Originator, Originating Depository Financial Institution (ODFI), ACH Operator, Receiving Depository Financial Institution (RDFI) and Receiver.
To best illustrate what I’m talking about here, check this out.
I am going to use Direct Deposit for my example, mostly because I just really enjoy getting paid, but also because I think we are all familiar with it.
The Employee/Receiver signs an authorization (agreement), providing their banking information to their Employer. The Employer/Originator uses this information to create an ACH transaction to pay the Employee/Receiver.
The Originator/Employer sends the transaction to their Financial Institution (Bank, Credit Union or Savings & Loan Association) a.k.a. the Originating Depository Financial Institution (ODFI) who in turn sends it to the ACH Operator.
There are 2 ACH Operators in the U.S.; The Federal Reserve Bank and Electronic Payments Network (EPN). The ACH Operator forwards the transaction to the Receiver’s Financial Institution a.k.a. the Receiving Depository Financial Institution (RDFI) who in turn, posts the transaction to the Receiver’s account.
In this Credit example, the parties are as follows:
Originator = Employer
ODFI = Employer’s Financial Institution
ACH Operator = The Federal Reserve Bank or EPN
RDFI = Employee’s Financial Institution
Receiver = Employee
If this were a debit transaction, for instance a consumer paying their mortgage, the parties would be the same, but the money would flow in reverse.
Originator = Mortgage Company
ODFI = Mortgage Company’s Financial Institution
ACH Operator = The Federal Reserve Bank or EPN
RDFI = Homeowner’s Financial Institution
Receiver = Homeowner
Those are the biggies. There are a few other optional parties, which we’ll talk about next time in Party, Party, Party.
Only because I know there are some fans out there like me, here is a link to the entire Who’s on First script.
http://www.baseball-almanac.com/humor4.shtml
And if you want to watch it…
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http://www.metacafe.com/watch/yt-VcOKk1-SqSg/abbott_costello_whos_on_first_whats_on_second/
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