NationalACH

Archive for March, 2010

In a transformation as profound as that from pony express to email, Check 21 legislation enabled the deposit and clearing of all types of paper checks — including business to business checks — through electronic image transfer.  Payroll, corporate, commercial, treasury, travelers and consumer checks can now be digitally imaged, deposited and settled electronically.

Remote Deposit Capture (RDC) brings the benefits of electronic image processing directly to a business location.  Advantages of RDC include shortened settlement times; elimination of transportation costs; extended windows for submission, earlier notification of potential fraud; and fewer staff needed for sorting, balancing, bundling and delivering paper items.

It’s simple to get started with RDC.  All a business needs are a computer with an internet connection, a check scanner, and a RDC service provider.

Checks are passed through the check scanner which creates a digital image of the check.  The image file is transmitted through a secured encrypted internet connection directly to a bank or through an RDC service provider sent on to the Federal Reserve for clearing.  Cleared funds are quickly settled to a current business depository account.

The entire clearing and settlement process can be viewed in online.  Check images are archived and easily available for retrieval and viewing.  Management reports can be created from any variables to help streamline cash management functions.

Benefits of Check 21 Remote Deposit Capture (RDC) include:

API software interface. Rolling out RDC is easy with quick integration with existing software.

Multi-function platform. Check 21-RDC, ACH, credit/debit card processing can all accommodated on the same platform.

Banking independence. Customers can use any financial institution desired as a depository account for the ultimate in flexibility.  No new bank accounts are required.  If the customer wishes to change banks at any time, continuity of RDC clearing (and smooth operations for customers) is assured.

Online check image archives. Easy search and retrieve for any image transaction.  All checks are archived online for fast and easy access making it simple to recover and share any payment documentation to customers.

Automated resubmission of returns. XML/SOAP eliminates the need for manual handling of returns increasing productivity and cash flow.

Full online reporting. The entire clearing and settlement process for each transaction is available online.  Management reports can be compiled quickly through the manipulation of any variables.

Faster access to money. Remote Deposit Capture fosters speedy check clearing resulting in drastically decreased settlement times.  Depending upon underwriting criteria of the customer, funds can settle to accounts as quickly as the next business day.  Faster settlement means increased cash flow and quicker availability of working capital for your customers’ business.

Reconciliation and management is infinitely easier. With RDC, checks are transmitted electronically eliminating the need for multiple depository accounts.  Customers’ finance departments will no longer be burdened with the time consuming administrative functions required to manage multiple accounts. Consolidation also enables customers to take advantage of volume based transactions discounts and will save them money on account maintenance fees.

Saves time and money. Electronic image transfer means fewer trips to the bank, saving transportation costs and eliminating courier and/or mail fees.  And, since checks are archived online, there is no need to photocopy checks before taking them to the bank saving money on copying and storage.

Increase productivity. Much of the error-prone manual labor of check preparation is eliminated with RDC, freeing customers’ employees to concentrate on other projects.  Streamlining of check deposits management accelerates the smooth flow of your customers’ business operations.

Expanded banking hours. RDC expands the banking hours in your day by 50%.  In an amazing gift of time, RDC deposits can be made up to 8 pm EST freeing customers of worries about meeting a 4 pm cutoff time.  Additionally, RDC offers convenient 24-hour deposit capability.  Deposit checks anytime, including nights, weekends, and holidays; after hours checks clear the next banking day.

Decreased fraud risk. RDC gives customers the protection of computerized anti-fraud programs which are not available with paper check transactions.  Electronic clearing includes anti-fraud algorithms and systems for customer security.  In addition, shorter clearing times offer better protection against check fraud.

Clear file delivery. In the rare case where a poor quality image is received, customers receive notification via email.  They can immediately resubmit the information assuring near 100% clear file delivery.

Geography disappears. Flexible online reporting means data can be rapidly shared with customers’ management team, no matter where they are physically located.

When automated teller machines first arrived on the market years ago, using them was like magic.  Put in a card, take out the money, and have immediate cash in your pocket.  It was kind of like going to a money tree.

With the rapid advance of debit cards, automated teller machines are quickly becoming historical relics.  If consumers want money they simply get cash back at point of sale.  There’s absolutely no reason to pay a surcharge to get cash.  Money back at point of sale in incurs no charges.  While getting money out of an automatic teller machine is means expensive fees.

But, old ideas are hard to die.  Manufactures of automated teller machines are adding new features and functions hope that these will increase the use of machines and create new profit centers.  For example, manufacturers are now adding check imaging stations on automated teller machines so that consumers can put in a check and have it immediately converted to a digital electronic file for deposit in the bank.

On the surface, this seems to be a good idea.  People will go ahead and put in their checks and have the conversion done at the automatic teller machine.  But is it really beneficial to consumers?

Check imaging is certainly the way of the future.  But, banks are already providing check scanners free to businesses.  What first started out as free check imagers to major corporations, has now trickled down so that even small businesses are getting free check imaging equipment from the bank.

Within a very short time, check imaging technology will be so inexpensive that ordinary consumers will be able to submit checks for clearing right from their own home computers.  And check imagers are now no longer needed because people can use their iPhone to take a picture of the check for deposit.  There will be no reason in the world for the consumer to ever go to a bank automated teller machine to do anything.  All transactions can be handled right from the consumer’s home computer.

For years automated teller machines were cash cows for the companies that placed them in the field.  Instead of looking for a new way to dress up an old idea whose time has passed, it is time for those companies to move on to the electronic age and to give consumers new innovations that will help their lives rather than just trying to preserve income streams for companies that are already gone the way of the horse and buggy.

For information on electronic ACH payment processing, visit nationalach.com

ACH payment processing for standard industry types is strictly a volume driven business.  High volume low risk ACH customers include utilities, education, insurance, property management, car payments, and any other business where the chance of a customer disputing a transaction is slim.

Some banks will provide ACH services to large customers.  The banks and processors make pennies per transaction.  Sometimes banks will not charge for ACH.  The reason is that ACH funds get to the bank quickly and the bank can enjoy a period of float on the money.

Banks do not advertise or promote ACH processing service.  Bank tellers or customer service representative frequently are not aware that the bank even provides ACH payment processing.  The best department to contact at a bank is treasury.

Some banks have moved to providing customers with online reporting which eases the burdens of reconciliation of accounts.  Others still function the old-fashioned way and simply send customers excel spread sheets.

Third party ACH payment processors provide more sophisticated reporting services, which is the main benefit of using a third party.  However, as regulations have changed, there are fewer third party ACH payment processors than in the past.

When a customer uses a third party ACH processor, settlement of funds is delayed by at least a day.  The ACH processor, of course, wants to make money.  Expect to pay at least a few cents more per transaction than if getting ACH payment processing through a bank.  But, high volume low risk customers are in the drivers seat with ACH payments.  Negotiate for low rates, fast settlement, and dedicated customer service.

ACH payment processing authorization is required with specific language that authorizes a merchant to process an electronic payment ACH debit transaction on behalf of the consumer.

Sample ACH Processing Authorization

Transaction Authorization:  By clicking the “authorization” button below, I confirm that I am the owner of the account identified by the numbers entered above and authorize this merchant to convert my account information entered above into an electronic debit to, my account for the amount of this transaction. In the event that my electronic debit is returned unpaid, I agree that a returned item fee also may be debited from my account electronically. The amount of the fee will be determined by the state where my billing address is located.  Further, by submitting a transaction, I expressly authorize this merchant to obtain a report of my check-writing history to prevent fraud and for other authentication purposes.

Confirmation Notice. Thank you for your order   Please print a copy of this receipt for your records.

Your transaction at www.merchant.com was authorized on (date).  For your records, the item(s) purchased include(s):

and will be shipped to:

Payment for this transaction will be processed electronically, debiting the (Total) amount stated above from the account of, (Name of Consumer) , on, or soon after, one business day from the date you authorized this transaction. You gave your authorization on (date) to electronically debit your account when you clicked on the “I Authorize This Transaction” button.  Make sure you void the check submitted for this transaction, so as to avoid re-presentment of the same check elsewhere.

Please be advised that this transaction should appear on your next bank statement in the electronic debit section (where you normally see your ATM transactions).  The transaction information should include the merchant’s name, the posting date, the check number you entered at the time of the transaction, and the amount of the transaction as stated above.

If you have any need to contact us regarding your transaction (including to correct any erroneous information or to request a refund, you may do so by calling us at, (800) 555-1234, or e-mailing us at customerservice @ merchant.com

An international payment via ACH refers to a credit or debit entry that with a financial entity located outside of the jurisdiction of the US.

Typical uses for international ACH are:

1. Payroll.  For example, a US or multinational company has employees working and living offshore.  The US companies sends an ACH file to the domestic bank with which it does business.   The file is transmitted to the international branch of the US bank which then credits the employee’s accounts with their payroll, via international direct deposit.
2. Vendor Payments.   A U.S.-domiciled company is a subsidiary of an offshore multinational corporation The parent company has centralized many of the global treasury, functions of its global subsidiaries in a location outside of the US.  Vendors are paid from the international company headquarters.
3. International Remittance.  For example, sending money to family members located outside of the US.
4. Pensions. A US company makes payments to retirees living outside of the US.

According to the Electronic Payments Association, consumers save both time and money paying electronically rather than writing paper checks.

Consumers who pay bills online save the least 90 minutes a month off the time it takes to pay monthly bills by paper check.  An average consumer paying bills by paper check spends two hours of month to write out the checks.  Those paying electronically spent only 15 minutes a month.

Consumers who have 20 bills each month save $150 a year if they pay by electronic means rather than writing out a paper check.  The $150 includes postage, the cost of checks, late fees, and fuel.

Paying bills electronically is safer than paying with a paper check.  Identity theft most commonly starts with somebody seeing personal information on paper checks bills or account statements.

Identity theft is frequently a crime of opportunity.  In considering the number of people who see personal information when the bill was paid by paper check, there is a higher likelihood of information being stolen simply because more people are seeing the information.  When a bill is paid electronically, there are no intermediaries who can steal the information.

Another reason to pay checks electronically is to help preserve the environment.  If all Americans started paying bills electronically rather than by paper, 151 million pounds of paper would be saved annually.  The amount of paper being saved equates to 8.6 million garbage bags of waste.  Electronic payment of bills would eliminate 2 million tons of greenhouse gas emissions from polluting the environment.

For more information on ACH payments, visit nationalach.com

The Standard Entry Class (SEC) code is a three letter code that identifies the nature of the ACH processing entry. Here are some common SEC codes:

ARC

Accounts Receivable Entries. Checks received by a merchant through mail or drop box and presented as an ACH entry.

BOC

Back Office Conversion. Checks that are converted from paper to an electronic debit at a centralized location.

CCD

Corporate Cash Disbursement. Primarily used for business to business transactions.

DNE

Death Notification Entry. Issued by the Federal Government.

POP

Point-of-Purchase. A check presented in-person to a merchant for purchase is presented as an ACH entry instead of a physical check.

POS

Point-of-Sale. A debit at electronic terminal initiated by use of a plastic card. An example is using your Debit card to purchase gas.

PPD

Prearranged Payment and Deposits. Used to credit or debit a consumer account. Popularly used for payroll direct deposits and preauthorized bill payments.

RCK

Represented Check Entries. A physical check that was presented but returned because of insufficient funds may be represented as an ACH entry.

TEL

Telephone Initiated-Entry. Verbal authorization by telephone to issue an ACH entry such as checks by phone. (TEL code allowed for inbound telephone orders only. NACHA disallows the use of this code for outbound telephone solicitations calls. )

WEB

Web Initiated-Entry. Electronic authorization through the Internet to create an ACH entry such as Paypal.

XCK

Destroyed Check Entry. A physical check that was destroyed because of a disaster can be presented as an ACH entry.

More information on ACH is available at nationalach.com

Echeck cashing stores are still the primary source of financial services for underbanked or unbanked consumers.  According the the Aite Group, this group of consumers seldom use electronic payments.  Instead, they rely on more traditional payment methods such as cash, checks and money orders.

Mainstream financial services company will have a difficult time weaning the underbanked and unbanked consumer away from reliance on check cashing stores. Although some of these consumers receive funds from check cashing on a prepaid card, the cards are used primarily as a substitute for cash.

Unbanked and underbanked consumers are certainly not good candidates for electronic bill payments.  For the most part, they remain outside of the mainstream financial services markets.

Results from the Aite Group survey realed that only 5% had paid a bill through an online banking site, although 13% had paid at a company website, and 8% had paid bills by the phone.  Most often, however, bills were paid by mail or in person.  The survey said that 31% were heavy cash users, 31% were heavy check users, 25% heavy money order users.

Info on ACH payments is at nationalach.com

Prepaid cards for general use have been marketed with the idea that the cards could be reloaded.  But, according to Mercator Advisory Group, many people who have the cards were not aware that the cards were reloadable.   And even if people knew the cards could be reloaded, only 11% of card holders had ever reloaded the cards.

Mercator estimates 79.7 million consumers don’t know about open-loop, or network branded, reload capabilities.  Banks, processors and merchants are keen to change that because reloads on prepaid cards can generate big profits.  Prepaid cards are most often reloaded at retail stores or at online bank sites.  .

The most common use of general purpose open loop card is for gift giving. Gifts accounted for 87% of card purchases.  Only 14% of card purchasers used a prepaid card for household-expense management in the past year. Most users simply throw away the cards when funds are depleted rather than reloading the card.

For ACH payment processing information, visit nationalach.com