One of the reasons to choose ACH processing over credit card payments is the lower risk of fraud.
To put matters into perspective, a report presented by the Federal Reserve in July 2014 illustrates the disproportion that exists between credit card fraud and ACH fraud. For year 2012, which would be the most recent information available, there were 13.7 million fraudulent credit card transaction, amounting to a value of $2.3 billion. In the same year, 0.5 million fraudulent ACH payments amounted to a total value of $393.3 million.
In spite of these reassuring numbers, it is expected to see an increase in fraud attempts, as the popularity of ACH payments continues to rise. Consequently, it is essential to understand how ACH payment fraud occurs and how it is different from other types of fraud.
ACH fraud is, in fact, quite easy to perform. The only two elements that the fraudster needs are the bank account number and the routing number.
In order to obtain these pieces of information, perpetrators will most likely use an email phishing technique that will enable them to install malicious software on the victim’s computer and obtain the login credentials to the bank account. Once this information is collected, the fraudster will initiate a transfer to their own accounts or provide it to a third party in order to request a payment.
Some fraudsters prefer a low-tech approach by relying on the information available on checks or by simply tricking the account owner in handing over the details. Once they gain access to the account, fraudsters may change the contact information in order to make it difficult for the bank to contact the account holder, impersonate the account holder if a verification does take place, or make payments that are consistent with the normal pattern of the account holder so as to fly under the radar.
Irrespective of the methods used, by the time the account owner realizes what had happened, the damage has already been done. If the fraudster withdraws the amount or transfers it repeatedly through international banking systems, it may be impossible for the originating bank to recover the loss.
When it comes to online payment fraud, prevention is the best way to go. Consumers and businesses have to be as educated as much as possible on how to avoid phishing scams and they must be careful to whom they provide their account information. Checking the bank statement as often as possible is also extremely helpful in identifying ACH fraud on time. In turn, banks have to integrate proper authentication, behavior analysis, and transaction monitoring into their fraud prevention strategy.
Despite fraudsters’ resourcefulness in exploiting loopholes in any payment system, the fraud rate of ACH payments continues to be considerable lower than the credit card fraud rate. This is extremely advantageous especially to high-risk merchants that are frequently most vulnerable to fraud attacks.
Implementing ACH payments through lets high-risk merchants benefit from safe and convenient online payments through the ACH network.
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