GIACT™ Publishes Report Detailing Risks of Same Day ACH Debit Payments to Faster Payments Ecosystem

Download the complete report, Securing Faster Payments

Source: Aite Group

"GIACT's goal is to educate the industry on not only the benefits of Faster Payments, but also the risks and ways to combat those risks," said David Barnhardt, executive vice president of product for GIACT systems. "We believe that collaboration among all participants in the payments industry is the only way to protect both the industry and consumers from emerging threats and maintain the integrity and efficacy of Faster Payments."

"With Same Day Debits, banks have to ensure their controls are sufficient to manage the additional risks inherent in this shorter turnaround time," said Aite Group senior analyst Linda Coven. "For business-to-business transfers, corporates should consider adding ACH positive pay, filters and blocks, if not already in place."

Background

Beginning September 15, 2017, NACHA rules mandate that Same Day ACH payments will be available for debit payments. This is the second phase of NACHA's deployment of same day ACH payments which began in September 2016 with same day credits. NACHA reported that, of the 25 billion ACH transactions that moved across the network in 2016, 26 million were same day. Additionally, between the fourth quarter of 2016 and the first quarter of 2017, same day payments increased 13% on the network.

Debit transactions on the ACH network have historically been more susceptible to higher return rates than credit transactions, and the risks associated with debit transactions will be exacerbated by the transition from delayed payment to same day. The systems and processes that many payment providers currently have in place to identify potential fraudulent transactions are not adequate to protect themselves and their customers from the increased risk associated with the move to same day settlement.

Key Takeaways

• Same Day ACH debits create new opportunities for fraudsters to use the shortened settlement windows to bypass existing fraud prevention tools and defraud financial institutions, payment processors, and their customers.
• Legacy account validation processes -- including prenotes and trial deposits -- will be ineffective at identifying and preventing fraudulent debits, potentially resulting in higher rates of unauthorized and administrative returns, fines and penalties, deteriorating customer experience, and unacceptably high fraud losses.
• Organizations planning to offer Same Day ACH debits need to update their existing systems and processes to validate both account status and ownership in real time in order to prevent a surge in fraud and take steps to proactively reduce unauthorized and administrative returns before making same day debits available to customers.

About GIACT
GIACT™ has been helping companies verify valued customers since 2004. From financial to insurance, to retail, to solutions for your industry, GIACT offers customer intelligence for complete payment confidence. As the leader in providing real-time data to help companies mitigate payment risk and fraud, our OFAC screening, ID verification, account verification and authentication, and mobile verification solutions enable you to focus on providing unmatched customer experiences. Since our founding, we've processed billions of transactions for our more than 1,000 customers. For more information, visit www.giact.com or call 1-866-918-2409.  Follow us on LinkedIn and Twitter.

SOURCE GIACT

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