Is Your Business Ready for the New NACHA Rule Change?

April 12, 2019

Today, fast and easy go hand in glove. 60-hour work weeks. Hundreds of emails. Commitment upon commitment. We’re all strapped for time, and always on the go. It’s second nature to tap a screen to pay our bills – online, or on our phones. Easy. And we expect that those bills are paid fast.

After all, now is the new normal. And, the enemy of fast is friction.

That’s why the upcoming NACHA rule changes are so important to understand. Any organization that offers consumers the ability to pay their bills with their bank account via the web or mobile device must add an additional layer of security before January 1, 2020. The rule impacts everyone who processes web ACH debits.

Recently, I sat down with our product line leader for risk payments solutions, Hector Sandoval, to get his perspective on the new rule. He and his team understand the best ways to mitigate risk by validating deposits and payments – whether through check, ACH or wire in batch or real-time. The end result is less friction for your customers.

Ian:  As always, it’s great to pick your brain, Hector.  Will you tell us a bit more about NACHA’s upcoming rule change?

Hector:  That’s a great question, Ian, and one that’s probably on the minds of many businesses. Organizations provide some sort of fraud mitigation program for online debits today. NACHA is adding an “account validation” requirement, meaning companies must assess the risk of fraud when accepting DDA accounts for web debits; this can include determining if the account is open and valid, but also verifying who owns and has the right to transact on the bank account  to avoid unauthorized transactions. This will enhance protections for consumers and companies alike.  But, there are lots of things to consider in a short amount of time to make sure you have the right tools in place.

Ian:  When will the new rule applied?  

Hector: The new rule will be applied whenever an account is used for the first time to transact, and if changes are made to an account number. We all love to pay our bill online, but unfortunately better conveniences and technology have also made it easier for the bad guys to commit online and mobile fraud. Because of this, companies are going to need to work closely with their financial institutions (FIs) to add another security layer to protect online debits.

Ian:  I’ve heard you talk about various solutions that’ll help companies implement this new rule change. Can you give us your insights?

Hector:  Companies are looking for ways to not inconvenience their customers while providing the best security. We know they can put out a pre-notification for the first time a consumer uses an account online, but that can delay things for several days.  This doesn’t offer a good customer experience.

There are tools like our Real-time Payment Chek® with AOA Service that validate payments fast. We use bank submitted data to screen checks and ACH items, to validate that an account is open and legitimate, authenticate ownership of an account, and then even predict the likelihood of a returned payment.  The process happens fast and is completely transparent to the consumer.

At the end of the day, it’s all about maintaining a fast and easy experience for your customers while protecting companies from fraud and meeting regulatory requirements.

Ian:  What are some best practices or tips that companies should do to get ready for this rule change?

Hector:  Now is probably a good time to audit your process. Begin researching to ensure you’re compliant with the new rule by January 1, 2020, which is only months away. Also, check to see if you’re currently validating accounts when you process web debits. Even if the answer is “yes,” it’s important to look at how the account validation is occurring.  How are you checking the person paying is the one authorized to use that account? Do you have the best tools in place? Make sure you talk to your financial institution about what’s available.

As a best practice, I would recommend any solution you’re using deliver a real-time response, be from a trusted provider, and not add process to the customer experience. A real-time response gives you the ability to review high-risk events before the payment happens and helps avoid both administrative and unauthorized returns.

Lastly, if you’re partnering with outside vendors, be sure to begin the dialogue sooner rather than later to see how they’re planning to comply with the new rule or what tools they can offer.

Ian: Thank you so much, Hector.

Want to learn more?

Early Warning's industry-leading payment solutions serve to mitigate fraud with advance notification of high-risk payments from all channels. To learn more about our real-time payments validation solutions visit our website at earlywarning.com or talk to your sales representative.

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