TCH

The organization owns and operates core payments system infrastructure in the United States, running cross-bank payment transactions and helping set payment policies and standards.

As the only private-sector Automated Clearing House (ACH) and wire operator in the country, TCH clears and settles nearly $2 trillion in U.S. dollar payments every day, representing half of all commercial ACH and wire volume. 

The Clearing House launched its real-time payment system (RTP) for all U.S. Banks in 2017, and as the latest payment rail, RTP is still gaining traction among banks across the country.

Origins of The Clearing House

Founded by New York City’s commercial banks in 1853, TCH successfully streamlined the process of clearing and settling checks. Prior to this, employees from over 50 banks to cross the city multiple times to present checks; even then, the settlement would not take place until Fridays, which left the banks open to risks and prone to errors. In this modern iteration, checks would be “sent and received” from a central office, bringing order and efficiency to the process. It soon became the central system for banks, and clearinghouses were established across the nation.

Since then, TCH has maintained operations—uninterrupted—through every financial crisis and disaster. Amid the 1907 stock and world markets crash, TCH began lending to banks, the stock exchange, and the City of New York. Through World War I, TCH played a significant role in restoring the country’s foreign and international exchange position. In the aftermath of the Great Depression, roughly 8,000 US banks failed—and only one of them was part of TCH.

This legacy continues to define TCH as an organization focused on bank-owned payment system safety, security, reliability, and efficiency. From the first U.S. check exchanges to the launch of RTP, TCH has evolved alongside the financial industry to connect banks with the shared goal of meeting the payment system needs of the next generation.

What role does TCH play in US payments?

Today, the US is home to thousands of banks and credit unions. The Clearing House is one of two clearing houses keeping the economic system running smoothly. The other clearing house is the Federal Reserve, known as FedACH or "the Fed", which is the public counterpart to TCH.

In addition to its core payment services, TCH provides a range of supporting services. These include payments association TCH Payments Authority, and check education and advocacy organization ECCHO. TCH also fills roles beyond its capacity as an operator, taking a thought leadership position in the industry, conducting research studies, and engaging with authorities to guide developments in payments policy, education, legislation, and regulation.

How is TCH different from FedACH?

As mentioned, the two clearing houses in the United States are TCH and the Fed. But when does a payment go through each one, and what’s the difference between the two? Here’s an example:

Suppose Maya banks at Wells Fargo and Fritz banks at JP Morgan. If Maya sends money to Fritz, the organization that "clears," or transmits the information of the payment, is TCH because the payment is moving through two major banks that are part of TCH.

Now, consider Lee, who banks with Limitless Credit Union. When Lee sends money to Fritz the payment is going between a big bank and a credit union. As a result, the payment has to be "cleared" by the Federal Reserve.

The bottom line: Whenever a payment goes between major banks, it's a TCH-cleared transaction. Otherwise, it's the Fed.

While the functionalities of the two organizations are essentially identical, the main difference between TCH and FedACH—besides TCH being privately owned—is the constituent banks. As a consumer in the example above, Maya doesn't have to think about where Lee or Fritz banks; she just tells her bank to send money using their account and routing numbers, and the payments get routed differently based on the fact one recipient is a major bank and one is a credit union.

By design, the two bodies work in sync, dividing payments based on the affiliated parties involved, and facilitating transactions through institutions that support our economic system as we know it.