Full form of ODFI

Full form of ODFI | ODFI Full form 

ODFI Stands for Originating Depository Financial Institution 

The ODFI has an agreement with an ACH Operator to transmit entries into the ACH Network on behalf of the Originator and ensure that they have proper controls and oversight over their payment processes.A commercial ACH Originator, usually a business or payment provider, creates one or more nr formatted ACH files to submit to their Originating Depository Financial Institution (ODFI) to process payments each day.The ODFI is the partner bank of the Originator and originates ACH transactions.

How it works,

The ODFI submits files to an ACH Operator, The ACH transactions will be sorted and sent to the designated Receiving Depository Financial Institution (RDFI) only few Bank will choose to be an ODFI because of the necessary requirements and associated fees. To be an ODFI, the depository financial institution must be responsible for obtaining authorization before crediting or debiting an account also responsible for Protecting ACH data security, good contractual relationships with each of its Originators,mitigate the risk of ACH returns etc

Lets understand ODFI through an example for better understanding The direct deposit of payroll is an example of an ACH credit transaction, so let’s say A works for a company called B, as the Originator, initiates an ACH debit from its bank account.The bank will sends an ACH file to its ACH Operator.