International ACH Transfer Process: A Step-By-Step Guide

Most businesses treat cross-border payments like a one-size-fits-all problem. Need to pay overseas? Send a wire. Easy. Except it isn’t. Not when you need scale, traceability, and sane fees. That’s why International ACH exists. It’s a middle lane between instant and expensive, built for predictable, low-cost payouts. 

In this guide, you’ll learn how it works, when to use it, and what makes it different from every other rail on your dashboard.. 

What this blog covers:

• What an International ACH Transfer is and how it works across borders
• How it differs from domestic ACH and traditional wire transfers
• Key benefits of using international ACH: lower cost, traceability, global reach
• Common challenges & compliance issues with cross-border ACH payments
• Best practices for businesses using international ACH payment rails
• How Osfin streamlines and automates international ACH reconciliation

What is an ACH Bank Transfer?

An ACH bank transfer is an electronic payment that moves money between U.S. bank accounts through the Automated Clearing House network. It batches transactions, follows NACHA rules, and typically settles in one to three business days. Businesses use ACH for reliable, low-cost, non-urgent payments.

While ACH isn’t built for speed, it shines when you need payments that are steady, cheap, and easy to track. Consider it as the backbone for payroll, bills, and routine payouts across the U.S, dependable, and reliable. And understanding how ACH works sets the stage for seeing how it extends into cross-border use.

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Also Read: ACH vs Wire Transfer: What Are the Differences in How They Are Reconciled?

What is an International ACH Transfer?

You can also use ACH transfers to send money across international borders. This process is known as an International ACH Transfer. It works by connecting the US ACH system with similar clearing systems in other countries. The result is a cross-border payment that uses local bank networks at both ends, keeping costs lower than international wire transfers.

International ACH payments are ideal for paying international employees, vendors, or freelancers. It's not instant, but it's reliable and traceable. When using an International ACH Transfer, the funds are routed from a US bank through the ACH network and then handed off to the local clearing system in the recipient's country.

Equivalent clearing systems in other countries include:

• SEPA - European Union
• BACS - United Kingdom
• BECS - Australia
• CPA - Canada
• EFT - India and South Africa
• SPEI - Mexico

These systems work similarly to ACH. They process domestic transfers in batches, helping reduce transaction costs while maintaining security. If you handle regular international payments that don't need to arrive the same day, International ACH transfers can be a cost-effective and dependable option worth considering.

IAT vs Global ACH or an International ACH Transfer

Now, a term that often comes up when discussing cross-border transactions is International ACH Transaction (IAT). At first glance, it may sound like just another name for an international ACH transfer. But they're not quite the same.

An International ACH Transaction (IAT) is a regulatory classification used by the US financial system. It applies to any ACH transaction that is either sent to or received from a bank located outside the United States. IAT is not a payment method. Instead, it's a standardized format required by NACHA to help US banks comply with anti-money laundering laws, OFAC screening, and other international regulations. Every IAT must include additional information about the parties involved, the country of origin, and the foreign correspondent institutions.

For example, A U.S. software company sends a monthly payment to a developer in Mexico. The money leaves a U.S. bank and lands in a foreign one, so the ACH entry is tagged as an IAT. More data is automatically pulled in, like country codes, bank details, and screening checks, before the transfer moves forward. 

To understand it better, in another scenario, A U.S. company pays a remote employee in Canada. The transfer routes through the U.S. ACH network, then hands off to Canada’s clearing system. Because it crosses the border, it’s formatted as an IAT, pulling in extra details about the employee, the purpose, and the Canadian institution involved. 

On the other hand, a Global ACH or International ACH Transfer refers to the actual process of moving funds across borders using ACH-like systems. This is a method of payment. It relies on a network of domestic clearing houses to process international payments through local infrastructure. 

So, while every International ACH Transfer from the US would be classified as an IAT, not all IATs are Global ACH payments. Some may still use SWIFT rails or other international payment systems, but because they involve foreign entities, they get tagged as IATs for regulatory tracking.

How does an ACH International Transfer Work?

International ACH transfers may look simple on the surface, but there's more going on behind the scenes. While it still uses bank-to-bank transfers like a domestic ACH, the process involves additional steps, screening, and coordination with the recipient country's banking system. Here's how the process typically unfolds:

Step 1: Payment Initiation

The sender authorizes the transfer from their US bank account. This could be a business paying overseas employees, vendors, or partners. Payment details include the amount, the recipient's bank info, currency, and purpose.

Step 2: IAT Formatting and Compliance Checks

Since it's an international transfer, the transaction is classified as an IAT. This triggers additional data collection, such as the recipient's country, intermediary bank, and purpose of payment. The sending bank runs compliance checks as per OFAC and AML regulations.

Step 3: ACH Network Processing

Once cleared, the payment is bundled with others and sent through the Automated Clearing House (ACH) network in the US. This step is similar to how domestic ACH batches are processed.

Step 4: Cross-Border Handoff

The transfer is handed off to the foreign correspondent bank or routed via an intermediary service provider. From here, the payment enters the recipient country's local clearing system (e.g., SEPA, BACS).

Step 5: Local Settlement

The funds are delivered to the recipient's local bank account through that country's clearing mechanism. Currency conversion may occur here, depending on the destination.

When Is an International ACH Transfer the Right Choice?

As we mentioned earlier, there are many payment methods you can use to send money across borders, like SWIFT wires, global payment platforms, or real-time international rails. So, amidst these options, when do you pick an International ACH transfer over the rest? 

Here are a few use cases where ACH international transfers are a good choice: 

1. You're Sending Recurring or Scheduled Payments

International ACH transfers are great for repeat transactions. This could be payroll for overseas employees, regular payments to international freelancers, or vendor settlements. Since the process is predictable and low-cost, it suits scheduled payouts well. You don't have to worry about fluctuating fees eating into your margins each month.

2. You Don't Need Real-Time Delivery

These transfers typically take 2 to 5 business days, depending on the destination country and banking systems involved. If your payment isn't time-sensitive, like salaries that are scheduled ahead or invoices with a standard due date, you'll benefit from the lower cost without compromising reliability.

3. You're Paying to Countries With ACH-Equivalent Networks

International ACH works best when the receiving country has a well-established local clearing system, such as SEPA in Europe or BECS in Australia. These systems allow smoother routing, fewer intermediaries, and often, better fee transparency. If your payee's country supports it, International ACH becomes a smart and scalable option.

Limitations of ACH / IAT you need to know

Cross-border ACH looks simple on paper. In practice, the rail comes with fine print that teams usually discover the hard way. Here’s the short, unvarnished version.

1. Not every bank or country is on the map.

Coverage depends on the sending bank and its partners. Some corridors work well, others don’t exist, which means you can’t rely on Global ACH as a universal payout option.

2. Slower and less predictable settlement times.

Payments can take several business days as they move through two clearing systems and multiple checks. Timelines shift by country, making it hard to promise exact delivery.

3. Value caps and “not-for-huge-tickets” reality.

Banks set limits on ACH amounts, often lower for cross-border entries. Large payouts still get pushed to wires or SWIFT because ACH wasn’t built for high-value settlements.

4. Extra compliance data, every single time.

IAT entries require detailed info on the sender, receiver, institutions, and purpose. Missing data triggers delays or rejects, adding friction to otherwise simple payouts.

5. Gateway rules: credits-only and other quirks.

Some banks allow outbound credits but block debits or returns. That makes refunds, corrections, or pull-based payments hard or impossible on this rail.

6. Format limits and remittance constraints.

IAT files have strict field and addenda caps. You can send basic payment details, but not rich remittance data, forcing teams to use other channels to deliver context.

Simplify Cross-Border Payment Reconciliation with Osfin

As a financial institution processing payments across borders, you're not just sending money, you're also tracking it across systems, currencies, and rails. That includes SWIFT, ACH, International ACH, and others. Each transaction needs to be verified, recorded, and reconciled with internal and external data sources.

This can quickly turn into a tedious and time-consuming process. The more payment channels you use and the higher the volume, the harder it becomes to match every transaction correctly. Manual reconciliation eats up time, delays reporting, and increases the risk of errors or missed exceptions.

That's where Osfin.ai comes in. It's built specifically for banks, credit unions, and fintechs to streamline payment reconciliation. Osfin automates the matching of transactions across multiple systems, flags discrepancies early, and gives you a real-time view of your payments data, all in one place.

With Osfin.ai, you get faster processing, greater accuracy, and full visibility across all payment rails. It supports seamless integration with your core banking and payment systems, while meeting regulatory and audit compliance standards.

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FAQs on International ACH Transfer

1. How much does an international ACH cost?

Fees can vary depending on the origin bank or payment service provider, but international ACH payments are generally cheaper than wire transfers. Some banks charge a nominal flat fee, while others may bundle it into monthly payment processing services.

2. How long does an international ACH transfer take?

It typically takes 2 to 5 business days for funds to reach the recipient's account. Processing time depends on the recipient country, banking regulations, and any intermediary banks involved.

3. Can individuals send international ACH transfers?

Most international ACH transfers are offered to businesses or institutions through commercial banking channels. Individuals usually need to use other cross-border platforms unless their bank provides access to ACH international services.

4. Is currency conversion handled in international ACH transfers?

Yes, currency conversion is usually done by the receiving bank or the intermediary bank during the settlement process. The exchange rate and conversion fees depend on the provider handling that leg of the transfer.

5. Are international ACH transfers traceable?

Yes, these transfers include tracking capabilities. While they aren't real-time, you can monitor the transfer status through your bank or payment provider to confirm completion and delivery.

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