How PCI Compliance Relates to ACH Payments

What is PCI Compliance?

The Payment Card Industry Data Security Standard, commonly known as PCI DSS, has long been the leading authority in terms of security for the credit card processing industry. Its reliability makes PCI enormously valuable when it comes to protecting not just card information, but any type of sensitive data, such as ACH payment processing credentials.

The misconception that only large companies that have huge processing capabilities need to be concerned with security will hopefully become less widespread. Today’s context makes it necessary for all merchants, irrespective of size, to protect sensitive information, and PCI DSS provides the necessary framework to do so. 

PCI is required for card payments.  Yet, it also adds protection for ACH payment processing.  

How PCI Helps Prevent ACH Processing Fraud

PCI compliance was introduced in the payment industry to stem the tide of fraud losses, but unfortunately, not all entities respect it as they should. A recent study released by the American Bankers Association (ABA) suggests that, in spite of the best efforts of banks to prevent fraud, their task is rendered difficult by retail data breaches.

These breaches, which have become the norm in recent years, are made possible by insufficient security protection.

The good news is that ACH payment processing, online banking, and wire transactions taken collectively make up just 2% of the losses reported by the ABA. Fraud losses, however, continue to increase, mainly because not all parties involved in the payment ecosystem are equally concerned with security and prevention.

The consistent implementation of PCI standards would make it considerably difficult for fraudsters to make a breakthrough to your ACH payment processing.

Tips to Protect Your ACH Payment Processing Account

Each business that uses ACH payment processing needs to do its share in this collective effort to prevent fraud. Even though ACH payments accounts register less fraud attacks, the risk is far from non-existent.

Since ACH payments are often low risk, ACH transaction processing is largely automated.  Therefore, detection of fraud might not occur in time to stop it. Given the fact that business accounts have just 3 days to reverse an ACH payment processing fraudulent transaction, it would be unwise to disregard this risk.

Some components of the PCI standard considerably reduce the prospect of suffering ACH payment fraud.  These include:

• Maintaining a firewall
• Using encryption when transferring sensitive data
• Making sure that the virus protection is up to date
• Putting into place a security policy that each employee needs to follow

How Employees Contribute to Fraud

Fraudsters can get access to ACH payment processing  information by targeting employees with tried-and-tested techniques,

For example fraudsters install  malicious software as email attachments.   When the employee clicks on the attachment, the harmful software is installed.  Some newer, more sophisticated, and quite effective techniques involve social engineering and impersonation.

These threats can be addressed by providing training to employees that handle ACH payment processing information on how cybercriminals perpetrate their acts.  

Also, two-factor authentication is an increasingly used method of securing payment information.

Regardless of what security measures a merchant decides to adopt, they need to be implemented and followed as consistently as possible, until they become a part of business as usual.

Conclusion

Following PCI recommendations for safe payment processing is a wise strategy.  Protect your business by following PCI standards for secure processing. 

Interested in finding out more? Contact info@nationalach.com

Payments for Online Lenders

Lenders Need Good Payment Processing to Succeed

Loans provided by payday and installment loan lenders are used by millions of people in the US. Individuals who live from paycheck to paycheck get these loans when they run out of cash a few days before their next paycheck.

Borrowers who apply for loans are required to provide bank account information. The bank account is used by online lenders to deposit the funds after loan approval. And the same account is to repay the loan.

E checks are the most common method used to debit the bank accounts. ACH credits are used to direct deposit loans to borrows’ bank accounts. 

The payday loan industry has been targeted by government agencies who claim deceptive and predatory lending practices. Most online lenders are moving to “installment loan” models rather offering payday loans specifically. Still, even lenders offering installment loans are experiencing significant challenges obtaining accounts with banks and processors.

Diversify ACH Processing to Mitigate Risk

Banks are wary about processing for lenders and processing. Fewer banks are willing to risk supplying account to the industry. Which leads to a classic economic supply and demand scenario for lenders seeking payment processing accounts.

There is little doubt that the online lenders provide a desirable and needed service to millions of Americans. And payment processing accounts are vital to the success of online lenders.

Obtaining accounts at favorable rates is an on-going project for most lenders. Lenders have experienced first-hand the risks associated with relying on a single bank or processor. The majority of lenders now want to establish multiple accounts to mitigate risk.

Government Interference Impacts Online Lenders

Government agencies have cracked down on the online lending industry through the implementation of Operation Chokepoint.  Although there have been some movement to stop the government interference, banks are still reluctant to process for the industry.

State laws regarding payday loans vary greatly. Some states prohibit payday lending while others do not. Designed to crack down on unscrupulous online payday loan lenders, a number of legal payday lenders have been unfairly punished as well.

Online lenders find it challenging to obtain or maintain depository accounts with banks, even when they have been customers of the banks for years. Fewer banks are willing to establish electronic check, ACH and card processing accounts for online lenders, severely impacting the business operations of lenders.

Conclusion

Access to cost-effective and reliable payment processing accounts is vital the success of online lenders.  Yet, banks are increasingly wary about working with the industry.

The prudent stratgy for success is to diversdify payment processing accounts. Given today’s environment, it’s too risky to rely on a single processor.  

Payment processing accounts are readily available for lenders. You can establish ACH and electronic check processing quickly and easily. 

Are you a lender interested in diversifying payment processing to mitigate risk?

Contact info@NationalACH.com today

Factors Affecting ACH Rates?

Pricing for ACH Processing

This article discusses the elements that are considered when setting rates for ACH processing. Rates for ACH payment processing are based on three main factors. 

• Industry Classification
• Monthly Processing Volumes
• Customer Authorization

High Risk vs. Standard Risk

Companies classified as high risk merchants classification have a different rate structure than low or standard risk accounts.  As one would expect, high risk ACH processing carries higher rates than standard risk processing.

 High risk ACH is associated with greater risk of contingent liabilities for processors.  These include a statistically greater likelihood higher revokes (chargebacks) and increased numbers of returns associated with high risk processing.

High risk ACH processing usually has a discount rate assessed as well as a per transaction fee. Standard risk ACH payments are generally priced at a flat rate per transaction.  

Monthly Processing Volumes

Companies processing higher volumes of transactions per month generally have lower rates than smaller accounts. This is not surprising.

Across industry, larger accounts have lower pricing. ACH processors often offer price breaks based on reaching monthly thresholds. Tiered pricing is common for large accounts, with rates lowered at as you move to higher volumes.

Customer Authorization

The way in which you obtain authorization from your customers can impact your rates. The lowest rates are associated with a written authorization from the customers.

When you accept checks online or check by phone orders, rates are higher. This is easy to understand.

There is a greater risk for revoked or returned transactions when the customer is authorizing the transaction online or on the phone. The consumer can later claim the payment was not authorized.  

There are ways to offset risk if written authorization is not obtained.  

For check by phone orders, record the payment authorization where the customer verbally agrees to the payment. Voice prints are as unique as finger prints.  Of course, voice recordings are helpful only if the buyer is the same person associated with the bank account. 

For online orders, identity verification adds a layer of protection.  Identity verification services are an inexpensive way to protect against fraud.  And you can require a digital signature from buyers to further reduce risk.

Additional Factors Affecting ACH Processing Rates

While transaction fees and discount rates are the biggest part of ACH processing rates, there are other elements to when looking at pricing.  These include:

• Returns for non-sufficient funds (NSF) or bounced checks
• Returns for unauthorized transactions (consumer revokes the transaction)
• Monthly account or gateway fee
• Optional advanced account verification services.  For example, early warning verification uses a variety of negative and positive databases to verify the account is open, has no bad checks written against it, and has money in it (although it does not “freeze” the funds for a particular transaction)
• Some processors also assess a one-time software license fee or account setup fee

Conclusion

ACH processing expands your ability to collect payments. The more ways customers can pay you, the more money you make.

Understanding the way rates are set is helpful as you apply for ACH processing accounts. And can help you lower rates as you build history with your ACH processor.  

Are you interested in ACH processing to increase your business profits?

Contact info@nationalach.com today

Overview of ACH Payments

What are ACH Payments?

For over 40 years, ACH payments have been used for electronic funds transfer in the US. 

The ACH network began mainly as a way to pay large number of people with direct deposits from the federal government for benefit payments (such as Social Security) and for corporate payroll.  ACH credits were the primary use of the network

As ACH became popularized, use expanded to include one time and recurring payments as well as for ACH debits initiated on the web or by phone. 

ACH payment formats allow information about the payment to be transmitted along with the transaction, creating efficiencies for senders and receivers.  

According to the Federal Reserve, ACH makes up 18% of noncash retail payments (and 51% of their value)  The combination of low cost and information sent with payments has made ACH a crucial component for back-office settlement in many payment systems.

Pros & Cons of ACH Processing

Although the ACH system is highly effective, safe, and inexpensive, it does have certain drawbacks for internet merchants.  One of the biggest issues for online merchants is that the system is batch, not “real time”.

ACH transactions clear through the Federal Reserve at midnight, rather than when the actual sale is made.  This introduces an element of risk as, an echeck can “bounce” in the same way as a paper check can.

Because of the batch nature of ACH processing, merchants often wait a few days to ship a product to be sure the echeck has cleared and there are no returns. 

Low ticket items, such as digital or virtual goods, often require immediate fulfillment.  In these cases merchants frequently will go ahead and deliver the product digitally.  Because, even if the transaction bounces, the loss can easily be absorbed.

Conclusion

The ACH network is one of the oldest and most reliable electronic payment systems in the world. Millions of Americans regularly purchase goods and services through ACH. 

When you accept echecks, you capture sales from shoppers that don’t have cards. And from buyers that are maxed out on cards. And many US consumers simply prefer to pay with an electronic check rather than a card.

Interested in ACH payment processing?

Contact info@nationalach.com today

Rates for ACH Lower than Cards

What is ACH Processing?

ACH processing lets you automatically debit payments from buyers’ checking or savings accounts. Funds are then electronically deposited to your business bank account.  

ACH payments capture sales from shoppers who do not have cards, are maxed out on cards, or who simply prefer to pay using ACH direct debit.

ACH Lower than Card Rates

There are two elements in determining the pricing structure for ACH accounts.  First is the classification of the transaction.   Secondly, your type of business, including the product and service being sold.

Classification of  transactions is based the way in which consumer authorization is received.   Written authorizations received from customers to direct debit bank accounts are considered low risk transactions and have correspondingly low rates.

For example, most people have written authorizations for direct debit for car payments, insurance premiums, rent or mortgage payments.  It is unlikely that a consumer will revoke such transactions.  Rates for written authorizations are generally priced at a flat rate per transaction, based on the number of transactions processed each month.  Rates range from 50-75 cents per transaction.

ACH payments to accept checks online or check by phone orders online or by phone without written authorizations carry higher risk since there is no written authorization in place.  Rates for these types of transactions are often higher than for written authorization, but this is not always the case.

For example, for customers paying rent, household bills, school payments, subscriptions, memberships etc, rates are often still have flat rates.  These types of payments, whether made online, by phone, or by written authorization, are seldom revoked by consumers.

Businesses selling goods or services online or by phone have a different rate structure. The determining factors are the types of goods and services being sold, the cost of the item and the industry classification of the merchant. 

Standard risk accounts will have a nominal discount rate plus a transaction fee.  High risk merchants have higher discount rates than standard risk accounts.  

Conclusion

Regardless of rate structure, ACH processing always will cost you far less than credit card processing.  You can save 50-80% for ACH transactions compared to rates for the same transactions processed with credit cards.

Interested in reducing processing expenses with an ACH payments?

Contact info@nationalach.com