Finding safety in ACH
Updated: Oct 28, 2020
If you are contemplating using ACH to quickly collect payments in your business, we have some important tips for you.
What is ACH:
Automated Clearing House (ACH) payments are electronic payments that pull funds directly from your checking account. Instead of writing out a paper check or paying with a debit or credit card, the money moves automatically.
ACH can make your life easier, but it can also cause problems. Get familiar with the pros and cons so you know what to expect.
ACH push, or credit, transactions allow your customers to send money from their bank directly to your bank accounts, using your merchant bank account and routing numbers. This can be a privacy concern, but is the most cost-effective method of ACH.
Push payments do not carry the same risk to the payer and tend to be quicker. The payer is in control of the timing of the payments.
Push payments are typically used for payroll direct deposits, mobile P2P services or wire transfers. Employers might push payroll funds from company accounts to staff bank accounts, for example, and some have started using push payments to facilitate instant earnings access. This allows them to send staff accrued daily wages to prepaid or debit cards after each shift, enabling employees to use their earnings right away.
ACH pull, or debit, transactions hallow you to extract money from your customers' accounts, using their bank account and routing numbers. These types of trasactions carry more risk to the customer and the fees are imposed upon you as the collector. These fees are a part of merchant service package.
Common forms of pull payments include payment receipt, debit card and paper checks. Payers provide PINs or authorized signatures, which grant recipients permission to extract funds.
Pull payments do carry risks for both merchants and payers. Customers who provide authorization do not necessarily know when payees will withdraw the promised funds and may not remember to keep enough money in their accounts to cover the costs.
Payees have within six months of issuance to execute a pull. Account holders who do not have enough funds available at the time of withdrawal will be hit with painful fees, and the payee will be left uncompensated until it finds another way to bill its customers.
ACH payments must be authorized by the account holder in order for the payment to go through. However, ACH fraud occurs when unauthorized funds are transferred into a bank account. This fraud can be executed if someone gets a hold of an account holder’s account number and bank routing number. The funds can then be used for fraudulent activity, leading to devastating loss for both consumers and businesses.
How to Avoid Fraud:
Thieves often obtain account numbers and other sensitive information through phishing emails. These types of emails are disguised with official-looking logos to resemble a real company or financial institution, or can even appear to be from a friend or colleague. The email prompts the reader to release private information, such as account numbers, user names and passwords, or includes a link to a site that collects the information.
Consumers can avoid their information from being compromised by recognizing these types of scams, and understand that financial institutions will rarely, if at all, ask for passwords or account information through email. Merchants and businesses must also be aware of these types of ACH fraud. Monitoring ACH payments closely and implementing PCI compliant security precautions to keep data safe are crucial to saving money and protecting business.
How We Can Help:
Our technology team at BrightBooks can help you safeguard your own and your customers' private banking information from theft. Please contact us to review your ACH agreements for our tips on preventing ACH theft.
35 Nutmeg Drive, Suite M375
Trumbull, CT 06611
Guilford Gate House – West Hall
2614 Boston Post Road, Suite 34B
Guilford, CT 06437