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Increasing processing precision for same-day ACH payments

Jul 31, 2017 Philip Burgess

Increasing processing precision for same-day ACH payments

With the reality of the upcoming same-date Automated Clearing House (ACH) debits taking effect in September, financial institutions, payment providers and businesses will need policies and processes in place to handle this major payment evolution. However, even though this transition is looming on the horizon, many organizations are not ready for what's in store.

When is same-day ACH coming?

While most ACH payments are currently settled within 1-2 business days, the National Automated Clearing House Association (NACHA) adopted a new rule to enable same-day processing of virtually any ACH debit payment.

To allow for businesses and financial institutions that utilize ACH payments to adequately prepare for this transition to same-day payments, NACHA is implementing the change over the course of three different phrases. While the same-day ACH credits went into effect in September 2016, the new functionality for same-day ACH debits will go into effect September 15, 2017.

"The new functionality for same-day ACH debits will go into effect September 15, 2017."

Although high-volume transactions above $25,000 are not eligible, these only represent about 1 percent of current ACH Network volume. With approximately 99 percent of transactions falling under the new same-day ACH rules, it's imperative that businesses ensure they'll be ready when the time comes.

NACHA's shift to same-day payments provides significant benefits for both businesses and consumers. Despite these advantages, it also creates the potential for fraud. Organizations need to undertake a comprehensive review of their ACH payment processing capabilities to mitigate their exposure to these new risks.

As noted by Payments Source, the shortened settlement window means that fraudsters have the opportunity to bypass existing safety tools, as prenotes, trial deposits and other types of legacy account validation processes raise the potential for risks in a same-day ACH payment environment.

Reducing risks associated with ACH

In the rush to become compliant with the new same-day ACH requirements, it's important that businesses have the means to lower costs while increasing payment collection capabilities. ACH allows lenders to receive electronic payments quicker and more efficiently, such as:

  • Credit card payments.
  • Debit card transactions.
  • Money transfers.
  • Person-to-person payments.
  • Business-to-business payments.
  • E-commerce.
  • Charitable donations.
  • Loan repayments and more.

But even with the ability to process all of these different types of payments on the same day, there's still a chance that a borrower might not have the funds in his or her account to cover the payment. This leads to insufficient funds fees, loan repayments returning unprocessed and other complications with the payment processing.

Business and lenders need the means to perform due diligence and verify whether a borrower's bank account exists. This is especially necessary for establishing automatic debits for borrowers using pre-established loan repayment schedules. 

Microbilt's payment processing services have a risk verification database that identifies and reduces possible unauthorized and administrative returns for same-day ACH payments. In addition, even if a payment is returned due to insufficient funds, Microbilt Consolidated Returns directs all returned checks, electronic payments and remotely deposited checks into a centralized account.

Further, Microbilt's Identity Verification solution cross-references multiple data sources to confirm whether a borrower is who they claim to be, which mitigates exposure to payments from fraudulent accounts.