Originators Originate

In the greater scheme of things, an Originator is so much more, does so much more and is responsible for more yet. We know already where they fall into the ACH model, but now let's learn who they are and what they do; besides originate.

 

In simple terms, an Originator is a party that gives permission to an ODFI or Third Party Service Provider to initiate ACH transactions into the ACH Network on their behalf.   Sounds easy, let's keep going.

 

Who is an Originator? A good example of an Originator is an employer. We all know how much I enjoy getting paid and because my employer pays me via Direct Deposit, that makes them an Originator. Other good examples of Originators are my gym, my insurance company, my mortgage holder, my cable company and the list goes on. What about me? Can I be an Originator?

 

Yup, I sure can. Just like my employer originates Credits (payroll) to my account and my gym, etc. originates Debits to pay my bills, I can originate a credit to give money to someone I know.

 

How does a company become an Originator? This is a little more difficult, not much, but a little. You cannot just mount your company flag to a pole, stick it in the ground and declare yourself an Originator. There is a process. The process includes finding a financial institution (Bank, Credit Union or Savings & Loan Association) or a 3rd Party Service Provider who is willing to take your transactions…remember, you have to give someone permission to initiate those transactions on your behalf and they are going to want it in writing.

 

It's called an ODFI–Originator or a TPSP–Originator Agreement. Among other things, this agreement binds the Originator to the ACH Rules and Regulations and lays out general and party specific responsibilities, such as:

 

Credit Exposure Limits

Deadlines/Time frames – how late are transactions processed

File formats – NACHA format please

Security Requirements – secure that computer, protect that information

What types of transactions will you process

Authorization/Authentication requirements

How Returns and Rejects are handled and more…

 

Before you get to this point though you have to go through an underwriting process of some sort, the FI or TPSP have to determine that you are not just some kind of a fly-by-night operation and that you are legitimate and you have to have someone or someones to whom you can originate transactions. That means you have to have their permission (authorization) to credit and/or debit their account. An authorization in some form or fashion is required for every ACH transaction – no exceptions. That's another post….the list grows.

 

Once you have all this in place, you are good to go – you are an Originator. You are now part of the process. It's almost like being a member of a lodge without the secret handshake. And when people ask you what you do; tell them you originate.

 

 

This post was originally posted on my blog Everything ACH at www.ach-consulting.com.  Please feel free to visit.