Accredited ACH Professional (AAP) Practice Exam

Which payment system is associated with net settlement?

1. Check Payment System

2. ACH Payment System

3. Card Payment System

4. Wire Transfer Payment System

The correct answer is: ACH Payment System

The ACH Payment System is associated with net settlement because it processes transactions in batches and settles them at specified intervals. In this system, transactions are accumulated over a period, and only the net amount is settled between banks at the end of the processing cycle. This means that rather than settling each individual transaction immediately, the ACH aggregates all the debits and credits to determine a net position, which simplifies the settlement process and reduces the volume of funds that need to be transferred between institutions. This method contrasts with other payment systems. For example, the check payment system typically involves individual transactions being settled at the time of clearing, while wire transfers usually operate on a real-time gross settlement basis where each transaction is settled individually and immediately. Card payment systems also generally settle transactions individually but can involve batch processing by the merchant’s acquiring bank before remitting to the card network. Therefore, the ACH's characteristic of netting makes it distinct in its settlement approach among payment systems.