NACHA Says Don’t Wait . . . Validate

Written by Di Princell

March 17, 2021

Doing beats stewing
~ Arnold Glasow

Forget the rear-view mirror, I want a mirror that lets me prepare for the upcoming traffic. NACHA warned us in 2018 that March 19, 2021 would be upon us sooner than expected and here we are, ladies and gentlemen . . . gooo time! NACHA Rule – – Businesses that originate online ACH debits must include account validation as part of a commercially reasonable system for fraud detection. Since NACHA, the governing body of electronic payments, represents over 10,000 financial institutions the effect will be far-reaching.

This rule change is designed for businesses who debit funds via ACH for online orders so that merchants and their online customers are better protected from fraudulent ACH transactions. Account validation is a process that verifies that the account submitted for the ACH purchase of goods/services is valid and belongs to the customer. This rule does not impact credit or debit card payments, just ACH payments.

Shawn Princell, CEO of RIBBIT and advisor to the NACHA board, says, the new rule forces a disruption to existing processes which provides a great opportunity to improve the user experience. Account validation shouldn’t be implemented just for compliance reasons. Many solutions provide value by mitigating risk such as: NSF/unauthorized, account takeover, and consumer affordability of payments. One flavor rarely fits every customer so make sure when you implement a solution that you have options.

As fraud increased around WEB based ACH payments, NACHA realized that many originators were not using a “commercially reasonable fraudulent transaction detection system”. As a protection against fraudulent payments, NACHA decided to regulate the originators at the source of the payment trail. Early detection before ACH debits are sent to the banks saves posting errors to consumer’s bank accounts. It’s a win-win for everyone involved.

Although the rule goes into effect in March 2021, NACHA has announced they will not be enforcing the rule until 2022. This provides businesses with additional time to find the right partners to secure compliance and improve their payment ecosystem. RIBBIT has engineered an encompassing risk formula that combines bank and payment intelligence with thousands of consumer attributes painting a broader and fairer picture of a consumer’s financial footprint.

Noncompliance of the new NACHA rule results in warnings followed by fines up to $500K per month until a resolution is made, and worst-case scenario is suspension of originating entries. Bottom line make it happen!

 

 

Stay tuned…

Related Articles

Does Data Privacy Even Exist?

Does Data Privacy Even Exist?

Judge a man by his questions rather than by his answers ~ Voltaire
As a typical consumer of goods/services, I wonder if my personal data is genuinely protected from the daily occurring breaches. As an owner of an AI-based, data analytics provider, I know that RIBBIT.ai’s number one priority, at all costs, is protecting our clients and their customers personal information. However, the data breach is every business’s worst nightmare, and if a representative tells you its security is 100% fail safe, turn around, run fast, and locate an honest company.

The Emerging World of Data Science

The Emerging World of Data Science

If we can choose, we can change. If we can’t change, then choice means nothing. ~The Rhythm of War
Defining data science is challenging enough, so let’s cut to the chase and focus on the goal – show me the money! Utilizing data science in business is the future, the now, and the forevermore. It’s an insightful and complex process that merges statistics with businesses acumen to make smarter decisions so that profitable opportunities can be expanded, examined, measured, and implemented. As technology advances, so does the scope and storage of data, increasing prospects for more accurate and relevant customization of products/services.