Q.) What's the difference between a Third-Party Service Provider (TPSP) and a Third-Party Sender (TPS)?
According to Article Eight of the 2023 ACH Rules and Operating Guidelines, a Third-Party Service Provider
is " an Organization that performs any functions on behalf of the Originator, the Third-Party Sender, the ODFI, or the RDFI (not including the Originator, ODFI, or RDFI acting in such capacity for such Entries) as related to the processing of ACH Entries, including:
- The creation of the Files, or
- Acting as a Sending Point on behalf of the Participating DFI, or
- Acting as a Receiving Point on behalf of the Participating DFI.
- An Organization acting as a Third-Party Sender also is a Third-Party Service Provider.
Common examples you'll find in the banking industry of TPSP would be your core processor, who would send ACH Entries to the Operator on your behalf, or accept them from the Operator on your behalf. This could also be a firm that helps an Originator create an ACH File, helping them stay compliant for those who don't have the bandwidth to create their own ACH files.
What about a Third-Party Sender? A TPS is a subset of a TPSP. Which means, that a Third-Party Sender is also always a Third-Party Service Provider. Article Eight of the 2023 ACH Rules and Operating Guidelines defines a Third-Party Sender as" a type of Third-Party Service Provider that acts as an intermediary on behalf of an Originator or another Third-Party Sender in Transmitting Entries between the Originator and the ODFI (of the ACH Operator on behalf of the ODFI via Direct Access), where there is not an Origination Agreement directly between the Originator and the ODFI.
A Third-Party Sender is never the Originator for Entries it Transmits on behalf of another Organization; however, a Third-Party Sender of Entries may also be an Originator of other Entries in its own right."
A simple way of breaking this down could be that a TPS is an organization that transmit ACH Entries into the ACH Network on behalf of another organization, the Originator. And that Originator has an ACH Agreement with the TPS, not the ODFI. Common examples of TPSs include property management companies, payroll companies, and organizations that transmit ACH entries to fund accounts, where such companies/organizations do not have an agreement with the ODFI.
Are you still not sure if an organization qualifies as a Third-Party Sender? Check out Nacha's Third-Party Sender Identification Tool
, which walks you through a series of questions in a workflow-type process to help you better understand your status.