Assessing the risks of ACH payments

Organizations today are tired of the inefficient processes, expensive fees and outdated methods involved in payment transfers. Modern business leaders want to move money in a more efficient, cost-effective way.

For that reason, more companies are turning to automated clearing house (ACH) payments. With $43 trillion moving across the network each year, ACH payments, or electronic, bank-to-bank transactions, are a viable option for businesses looking to move money without the hefty price tag.

While the rate of fraud for ACH payments is relatively low, there is always a risk of bad actors whenever money is moving. When it comes to securing your money transfers, here is everything you need to know about assessing the risks involved in ACH payments.

Understanding types of fraud

Before protecting your payments, you need to understand what you’re protecting them from. Fraud comes in many shapes and sizes. Two common ones are identification fraud and payment fraud. Identification fraud—such as a stolen ID or the misuse of an ID—is what we see if there are errors like an age restriction on the transaction. Payment fraud happens with a false or illegal transaction.

Depending on your industry, each state has fraud regulations, as well as a separate set of fraud regulations from the federal government. In fact, there could be many different regulations you must comply with when operating a business across state lines.

It’s critical to research which regulations apply to your business, as regulatory violations may result in the loss of your business license, fine payments and potential civil and criminal penalties. To protect yourself from the risks, consider a documented Anti-Fraud program. Having a well-documented program could help reduce any potential regulatory fines or other scrutiny.

Acknowledging the need for a fraud monitoring plan

When you offer the ability to move money, your business should implement security processes aimed at preventing and mitigating returns. Having a high-level understanding of both your users and how they transact will help detect any unusual activity. The most important aspect of any information security program is to have a strategy to identify, assess and manage security risk.

While some businesses have the ability to manually review all account activity for each and every one of their users, this process isn’t an option for every organization — and can be extremely unruly as you scale. In this case, many companies will either choose to build internal monitoring and reporting software or opt for a third-party that provides this type of service.

Monitoring and reporting software can be tailored based on criteria including IP addresses, frequency of transactions or average dollar amount. Again, this is where knowing your users and how they normally transact is beneficial. Being aware of inconsistencies that might identify risky behavior ahead of time allows you to put a stop to said behavior before it has the chance to cause your business a loss from a return.

The power of two-factor authentication

If you want to deter bad actors from maliciously using your platform or service, add friction (additional steps) in the onboarding process. As much as we’d like to rely on users or password requirements to create complex passwords, it simply isn’t enough.

Implementing two-factor authentication (2FA) will give you peace of mind that your business and your money are protected, even when users choose passwords like “P@ssw0rd” or “12345.” Using email verification or requesting additional documentation can be used to support user identity verification.

Returns do not discriminate and can happen to anyone in any business. When it comes to protecting your business, more information is better. Not to mention, there are potential regulatory issues if you’re not compliant. So, whether it’s a driver’s license number, employer pay stub or business document, having the necessary information is essential.

Returns are a part of any payment type, which includes everything from credit cards and debit cards to paper checks and even ACH. The ACH network supports the ability to return entries for specific reasons. When a transaction is not properly authorized or includes inaccurate information, the ACH return process allows participants in the ACH network to deny an entry and return it to the originator. Additional integrations can help decrease the likelihood your users or business will receive an ACH return code.

The key to keeping transactions secure is to find the tools and processes that best fit your business needs. When it comes to assessing the risks of your organization’s ACH payments, it benefits your business to be proactive instead of reactive. By understanding the type of fraud your business is at risk of, monitoring and reporting on your user transactions and adopting a two-factor authentication system, you can rest assured that your business has the best practices in place to secure your payments.

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Assessing the risks of ACH payments