What is ODFI?

An ODFI is a financial institution that initiates the ACH (Automated Clearing House) transfer on behalf of a sender. This institution processes outgoing electronic payments, such as direct deposits, bill payments, and other ACH transactions. The ODFI is responsible for verifying the transaction and ensuring that it adheres to the NACHA (National Automated Clearing House Association) rules.

In the ACH network, the ODFI collects the payment instructions from its customers and forwards them to the ACH operator for processing. Once the transaction is initiated, the ODFI ensures that the funds are available, and that the transaction is completed successfully. Understanding the role of the ODFI is crucial for businesses and consumers participating in electronic payment systems, as it plays a key part in the efficiency and reliability of electronic funds transfers.

Also referred to as Originating Depository Financial Institution.

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Synonyms:

Payment Initiator
ACH Originator
Originating Bank