Blockchain-powered ACH: An Evolution in Clearing House Solutions

Blockchain is quickly emerging as one of the main disruptors of the fintech revolution. The underlying technology behind cryptocurrencies has infinite potential, including ACH Solutions.

The entire world is witnessing the digital transformation of existing banking and finance systems. Modern technologies are revolutionizing the entire banking process delivering better results with higher accuracy, speed, and efficiency. Fintech is one of the fastest-growing global sectors with reports forecasting a 26.87% CAGR. Increasing digital payments adoption, eCommerce, global smartphone proliferation- all attribute to the global fintech success. Last but not least, blockchain technology serves as a huge platform for building next-gen banking innovations such as automated clearing house solutions.  

The Role of Clearing Houses in Banking

A clearing house ensures that both the buyer and seller sides observe and follow all contractual obligations during deal settlements. They protect the banks by preventing a counterparty from going back to a transaction that has already been settled. Clearing houses authenticates and confirms a transaction. 

It is thus easy to comprehend the significance and magnitude of transactions undertaken by clearing houses on a global scale. They are integral to the global economy and require absolute accuracy while registering transactions. And, they also need an efficient ledger system to maintain proper transaction records. Automated Clearing Houses(ACH) are an efficient solution. 

ACH: The Need for Automation

Several arguments can be made in support of automation in the banking, insurance, and financial sectors. The prominent ones include:

• Better Use of Human Resources
  Processes scheduled for automation are routine, repetitive and boring. By assigning them to robotic process automations(RPAs), a clearing house can make judicious use of its available human workforce into more productive channels. 

• Quicker Operation Speeds
  A repetitive task once programmed and automated can be completed with higher efficiency than human efforts. The processes are simply completed faster, as high as 80%.

• Lower Chances of Error
  Automation prevents errors. The possibility of an error occurring is eliminated during the QA, development and testing phase of the automation program.

• Cost-Effective
  The initial automation setup implementation is usually a one-time investment and may require maintenance from time to time. The process is cheaper and more efficient in the long run. 

• Environment-friendly
  Automation stores data acquired using digital means. This prevents the use of paper, contributing to a greener environment. 

Blockchain-Powered ACH Solutions

An ACH solution using blockchain architecture expedites the verification of electronic payments and money transfers during interparty mediation and settlements. They utilize the robust blockchain network architecture to facilitate effortless fund transfer between participants and the prevention of fraud. Blockchain solutions providers specializing in blockchain ACH design products featuring system-payment API, empowering businesses with payment transactions from the customer end to ensure ACH payments.

Using blockchain ACH solutions, it is possible for insurance companies to receive payments on time while their clients realize the claim, simultaneously. Software solutions powered by blockchain inherit the features of a blockchain network: real-time access, high security, privacy, immutability, transparency, and more. 

How Financial Transactions are Completed in a Blockchain?

Conventional blockchain-based financial transactions are completed in three steps:

• User Authentication
  The blockchain network authenticates the identity of member nodes using digital signatures. It features a cryptographic mechanism with a pair of public and private keys. Each user retains a private key that functions as a digital signature. The use of dual keys validates both transactions and the user’s identity, preventing the records from being tampered with.

• Content Verification
  A sender needs the public key of the recipient’s digital address to complete a transaction. The process traces the entire operation starting from the sender’s Bitcoin or crypto acquisition, optional node transaction incentives, and sending the amount to the recipient. 

• Blockchain Network Operation
  The blockchain network authenticates and ascertains the sender’s key signature and crypto ownership. Once complete, a node member assembles the sender-recipient transaction on a data block along with several other transactions. The data block then becomes a part of the blockchain’s distributed ledger confirming the new ownership of the assets associated with the transaction. 

Features of a Blockchain ACH

Blockchain solutions for automated clearing houses comprise the following features:

• The interface for the application program is versatile, capable of functioning in banking, insurance and other financial sectors. 

• Blockchain ACH solutions are capable of facilitating seamless fund transfer.

• The solutions are customizable, featuring different products at different price ranges as per requirements. 

• Despite being foundational in nature, blockchain-based innovations easily integrate with existing processes- maximizing returns while reducing costs and setup time.

• Blockchain solution providers offer constant updates on their payment processing solutions, helping organizations stay updated with the latest technological progress. 

Final Words

The global financial sector is already undergoing a digital transformation utilizing modern-age technologies to provide better services in a cost-effective manner. Blockchain technology with its distributed sharing mechanism provides multiple ways to improve existing services. 

It eliminates intermediaries or middlemen in between financial transactions resulting in a massive drop in payment processing charges, both on national and international scales. The results are imminent with the global blockchain industry projections showcasing 68.4% CAGR, from USD 4.9 billion in 2021 to USD 67.4 billion in 2026.