What is another name for the Payee's Depository Financial Institution?

What is another name for the Payee's Depository Financial Institution?

• A. Payee Bank
• B. Bank of First Deposit
• C. Payor Bank
• D. Collecting Bank

Answer: (B)

The Payee's Depository Financial Institution is commonly referred to as the Bank of First Deposit. This term specifically indicates the bank where the funds are initially deposited after an ACH (Automated Clearing House) transaction occurs. In ACH transactions, the funds are transferred from the Payor's account to the Payee's account, and the Payee's financial institution is responsible for receiving those funds and making them available to the Payee. Understanding this terminology is important in the context of ACH operations as it clarifies the role of the financial institution handling the deposit of the funds. The Bank of First Deposit is often the entity that processes the check or ACH transaction for the first time and plays a critical role in the payment cycle. This designation helps differentiate it from other financial institutions involved in the transaction process, such as the Payor Bank, which is the financial institution of the party making the payment, and the Collecting Bank, which refers to the institution that facilitates collecting money on behalf of the Payee. Recognizing the correct terminology and its implications within the ACH ecosystem enhances comprehension of the flow of transactions and the roles of various institutions involved.

The Payee's Depository Financial Institution is commonly referred to as the Bank of First Deposit. This term specifically indicates the bank where the funds are initially deposited after an ACH (Automated Clearing House) transaction occurs. In ACH transactions, the funds are transferred from the Payor's account to the Payee's account, and the Payee's financial institution is responsible for receiving those funds and making them available to the Payee.

Understanding this terminology is important in the context of ACH operations as it clarifies the role of the financial institution handling the deposit of the funds. The Bank of First Deposit is often the entity that processes the check or ACH transaction for the first time and plays a critical role in the payment cycle. This designation helps differentiate it from other financial institutions involved in the transaction process, such as the Payor Bank, which is the financial institution of the party making the payment, and the Collecting Bank, which refers to the institution that facilitates collecting money on behalf of the Payee.

Recognizing the correct terminology and its implications within the ACH ecosystem enhances comprehension of the flow of transactions and the roles of various institutions involved.