Payment gateway providers, processing transactions worldwide, need to be aware of the fact that different countries are using different systems to handle bank account transfers. Such countries as the USA and Canada rely on the so-called one-phase systems. In such systems a merchant sends a file with transactions to be funded to the clearing house (ACH/Federal Reserve is an example of the clearing house in the US). The clearing house then clears the funds and waits for up to two months for the transactions to be approved or declined by member banks. If a member bank declines a transaction, the merchant has to return the respective amount to the clearing house.
Under a two-phase approach all accounts, through which a merchant is going to process transactions, have to be registered within the nation-wide system. Once he registers all the accounts and obtains respective mandates, he can start processing transactions. Registration of the accounts is the first phase of the process, while the second phase is more or less the same as in the one-phase system. As we can see, the second approach is more reliable, but, at the same time, it is more complicated.
To learn more about bank account transfers, check out the respective publication on #Paylosophy.
Make use of the diagram ‘Handling Bank Account Transfers Worldwide’ in order to understand better how different systems for bank account transfers work.