ACH

When Paypal connects to a bank account for either payments or deposits, it uses
an electronic interface operated by the Federal Reserve; this interface is known
as the automated clearing house. When Paypal initiates a transaction, it assume
s the role of originating depository financial institution in the ACH transactio
n. Paypal sends an electronic request for funds or notice of deposit through the
ACH system to the user s bank, and the linked bank account responds with confirma
tion. Funds transferred through the ACH take three to five business days to sett
le.
Sending Payments - eCheck
When a user completes a purchase and elects to pay via Paypal, the user may sele
ct either an electronic check, known as an eCheck, or an instant transfer from a
bank account. If the user selects eCheck as the payment method, Paypal advises
the seller that the buyer has submitted payment and that the seller will receive
funds in three to five business days. Paypal initiates an ACH transfer from the
user s bank account, allowing three to five business days for the transfer to com
plete. Once Paypal receives the funds, the company credits the seller s account an
d the transaction is complete.
Sending Payments Instant Transfer
Paypal users who have linked both a bank account and at least one credit card to
their Paypal accounts may have the option to select Instant Transfer when compl
eting a purchase. An Instant Transfer bank account payment works much like an eC
heck, according to Paypal, but Paypal places a temporary hold on the user s credit
card before initiating the ACH transaction. Because Paypal can charge the user s
credit card if the ACH transaction fails, the company instantly credits the sell
er s account to complete the transaction.
Receiving Payments
Paypal customers who use the service to receive payments may leave funds in thei
r Paypal accounts for subsequent online spending, withdraw or spend the funds us
ing a Paypal debit card or transfer the funds to a linked bank account. When a u
ser elects to transfer the funds to a bank account, Paypal initiates an ACH tran
saction, notifying the customer s bank of an incoming transaction. Paypal electron
ically transfers the withdrawn funds to the customer s bank, and the bank credits
the funds to the customer s account. Because Paypal withdrawals process through th
e Automated Clearing House, customers can expect withdrawn funds to appear in th
eir bank accounts in three to five business days.