Reviewed by Sep 30, 2020| Updated on
The finality of payment refers to the moment when a payment to another party is completed. That is when the receiving institution has irrevocable access to the money. It is when the funds are good in an account.
The term becomes useful when one or more banking institutions involved in a transaction can cease operations at any given point in time. The status ensures the receiving institution that the recently received funds do not disappear from its account just because the transferring institution suddenly became insolvent.
With the rising popularity of online bill payment facility, consumers make use of it for their regular payments. Since many online bill payment desks use the Automatic Clearing House (ACH) system to process payments, many companies do not consider a bill to be paid until the finality of payment is assured. This is because most companies do not instantly make payments to these companies.