Posted by NationalACH on Nov 14, 2015
high risk ACH processing

High Risk Merchants Prefer E Checks

In the US, there are two methods of debiting a bank account.  First is ACH debits, which process transactions through the Automated Clearing House network.  The second is echecks, which processes payments via bank-to-bank transfers.

Many merchants who were using high risk ACH processing are moving away from ACH payments and are using echecks instead.  The reason for the change is that NACHA is changing the rules regarding the number of returned transactions that are permitted to flow through the ACH network.

Beginning in September 2015, the threshold for unauthorized returns (also known as revokes or chargebacks) is being lowered to 0.5% from the current from 1%.  Returns for administrative or account-data errors must be no greater than 3%,   In addition overall returns for any reason must not exceed 15%. 

If return rates go over the levels, ODFIs risk investigation or enforcement proceedings.  The proceedings includes an 8 step process that examines every part of the banks' ACH processing. 

Let's get real.  How many ODFIs do you think are going to be willing to risk an examination?   In reality, most banks will get rid of high risk ACH processing merchants rather than take any chances.

Echecks Different than High Risk ACH Processing

The user experience with both ACH processing and echecks is the same. The customer provides bank routing and account number information and authorizes the transaction.

The difference is on the back end processing. 

With ACH, transactions clear through the ACH network.  Therefore, the transactions are subject to NACHA rules. 

Echecks are cleared through bank-to-bank data exchange.    These transactions are governed by the UCC and long-standing laws regarding checks.

As a result, echeck transactions do not need to adhere to the tight and rigid rules governing ACH payment processing.  There is substantially more leeway for returned and revoked transactions.

How High Risk Merchants Set Up E Check Processing

The application for electronic check processing is very simple.  You submit an application along with supporting documents.   Allow 5-7 business days for the account to be activated.  Then you're good to go.

You can integrate echeck processing with your websites via an API to accept checks online.  You can accept check by phone, mail and fax orders using a virtual terminal.  And you also have the option of uploading batch transactions through a secure FTP site.

Are you a high risk merchant that wants to increase profits with echecks?

Contact today.