A new report finds 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.
Also, 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.
Additionally, 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.
GIACT Systems released “Securing Faster Payments: Protecting your Organization and Customers from the Risks of Same Day ACH Debits.” The report explores the significant new challenges that organizations need to address prior to launching same day debits. It also provides recommendations on how organizations can adapt their internal risk management processes and technology to fully prepare for 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. For business-to-business transfers, corporates should consider adding ACH positive pay, filters and blocks, if not already in place.
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.