What is the role of an Originating Depository Financial Institution (ODFI)?

The role of an Originating Depository Financial Institution (ODFI) is to initiate ACH transactions on behalf of its clients. An ODFI is a financial institution that processes the outbound ACH entries initiated by its customers, which can include businesses and organizations that wish to make electronic payments, such as payroll deposits or vendor payments. This institution acts as the starting point for transactions in the ACH network, ensuring that the payment instructions are communicated to the appropriate ACH operator and that funds are transferred accordingly.

By initiating these transactions, the ODFI effectively facilitates the movement of money from the originating account to the receiving financial institutions, thus playing a crucial role in the electronic payment system.