What does the term “settlement” mean in ACH processing?

In ACH processing, the term “settlement” refers specifically to the finalization of a transaction, which involves the actual transfer of funds between financial institutions. During the settlement phase, the ACH network facilitates the movement of money from the originating bank (the bank initiating the transaction) to the receiving bank (the bank receiving the transaction). This process ensures that funds are made available to the recipient as intended, completing the transaction lifecycle.

Settlement is a critical component in the overall ACH process, distinguishing it from other steps such as transaction initiation or data exchange. Therefore, option B accurately reflects the meaning of settlement, emphasizing the crucial outcome of fund transfer that is essential for completing transactions within the ACH system.