ODFI vs RDFI

ODFI (Originating Depository Financial Institution) is the bank that initiates or originates an ACH transaction.

RDFI (Receiving Depository Financial Institution) is the bank that receives an ACH transaction.

These terms appear in ACH return codes and processing documentation.

Understanding the Roles

ODFI (Originating Bank)

• Receives ACH instructions from customers or businesses
• Creates ACH files and submits to the ACH network
• Responsible for transaction accuracy and authorization
• Handles returned transactions from RDFI

RDFI (Receiving Bank)

• Receives ACH transactions from the network
• Posts debits or credits to customer accounts
• Returns transactions that can't be processed (insufficient funds, closed accounts)
• Protects customers from unauthorized transactions

Example: A debt settlement company processes monthly deposits from 5,000 clients. The company's bank (ODFI) originates 5,000 ACH debit transactions. These transactions route through the ACH network to hundreds of different RDFIs (the clients' banks). Each RDFI receives the debit instruction, checks if the account exists and has sufficient funds, and either completes the transaction or returns it to the ODFI with a return code like "R01 - Insufficient Funds" or "R02 - Account Closed."

Common ACH Return Codes

• R01 - Insufficient funds (RDFI can't debit account)
• R02 - Account closed (RDFI rejects - no longer valid)
• R03 - No account/unable to locate (RDFI can't find account)
• R10 - Customer advises unauthorized (RDFI protects customer)

Understanding ODFI/RDFI roles helps businesses interpret ACH return codes and manage payment processing effectively.