ACH Trumps Cards for Recurring Billing

ACH Trumps Cards for Recurring Billing

Protect Cash Flow with Echecks

Encouraging your customers to use ACH for recurring payments stabilizes cash flow, saves money, and increases the long-term value of your customers to your business.  

Recurring Billing Business Opportunity

Traditionally, ACH merchant accounts have been used for collecting payments for monthly bills such as utilities, car notes, insurance and mortgages,  

Within the last 10 years, however, the growth of recurring billing has soared.  

Software & computer services have moved to a recurring billing models with software as a service (SaaS) and easy payments for equipment. Entertainment sites offer video streaming, music, games.  Phone companies, always a recurring billing model, now offer apps that are paid for monthly.

Giving your customers the ability to pay for your goods & services on an recurring basis is simply smart business.  Easy payment plans are convenient for buyers.  And recurring billing is well-ingrained in the buying habits of most Americans.  

Recurring Billing as Part of Your Business Model

Ventana Research released in early 2015 their benchmark study about recurring billing which sheds light on why companies choose to implement this feature and what challenges arise while it is being used.

When asked to state the reasons for using recurring billing, the most common answers picked by those included in the survey were to:

  • Increase revenue (51%)
  • improve customer satisfaction (51%)
  • Increase customer loyalty (46%)
  • Expand into new markets (44%)
  • Improve customer satisfaction scores (41%)

The respondents were also asked to choose the most difficult challenges that come along with the use of recurring billing. The results revealed their most common concerns:

  • Customer engagement throughout life cycle (55%)
  • Cross-selling and up-selling (46%)
  • Customer retention (39%)
  • Creating new accounts (34%)
  • Invoicing (33%)

Most of these concerns can be overcome or entirely eliminated through various techniques, which will enable you to take advantage of the full potential of recurring billing.

Overall, the conclusion of the study was that the success of recurring payments is quite certain as long as sales, billing, and customer support functions align with the billing model.

ACH Payments Are Perfect for Recurring Billing

The recurring billing feature offered by ACH payments is one of the key components in stabilizing your cash flow.  

Information necessary for ACH transactions is far more stable than credit card information, making it the preferred method of payments for recurring billing.  Once ACH payments begin, there is seldom any change in billing information since people rarely change bank accounts.  Leading to fewer instances in which the payment cannot be processed due to expired information.

Compare this to card transactions.

Cards expire.  They get lost or stolen.  Data breaches mean cards must be reissued.  Requiring you to obtain new billing information from your customers.

Updating payment data is a big project for your customer service staff.   Which can result in customer dissatisfaction if services have to be terminated due to lack of current billing information.  Plus, asking for updated billing info gives your customers an unnecessary reason to cancel.  

Conclusion

Recurring ACH payments stabilize cash flow, decrease expenses, and increases customer satisfaction.   “Set it and forget it” recurring billing keeps the money flowing in.

Interested in an echeck account to protect cash flow from recurring billing?   

Contact info@nationalach.com today

 

What is ACH Payment Processing?

What Is ACH?

An ACH merchant account is an excellent alternative to card payments, allowing you to capture sales from customers that do not have cards, are maxed out on cards, or simply prefer to pay with an electronic bank transfer.  

ACH rates are also often significantly lower than rates for processing cards.  Which results in savings on payment processing costs while helping reduce fraud & chargebacks.  

The Automated Clearing House Network (ACH Network) provides the framework necessary for the processing of ACH payments, a type of transaction that is increasingly popular across the United States.  ACH electronically debits money from your customers’ bank account and automatically credits the funds to your business bank account.  

History of ACH 

Looking at the history of the National Automated Clearing House Association (NACHA), one immediately sees a continuous drive for innovation and expansion. The foundations of the network were set in 1974 when several ACH associations formed NACHA, and only four years later, as additional rules and regulations were put into place, it became possible for any two financial institutions across the United States to process this type of payment.

Over the next three decades, the institutional framework of NACHA was further developed, an evolution that paved the way to the implementation of internet and telephone-initiated payments (2001) and international payments (2009). The network now has the capacity to process both one-time and recurring transactions.

Simple Way to Collect Payments

The mechanism behind ACH payment relies on the exchange between an Originating Depository Financial Institution (ODFI), which can be either an individual, corporation, or some other entity, and a Receiving Depository Financial Institution (RDFI). The ODFI will enter an ACH entry according to instructions, and an entire batch of such transactions will be submitted at specific intervals to an ACH Operator. The last step is carried out by the ACH Operator that will assign the transactions to the appropriate RDFI.

ACH Shapes the Future of Payments

By the late 80s, the ACH network processed around 1 billion transactions on a yearly basis. The constant expansion of the network and growing popularity of the payment method made possible the processing of 22 billion transactions in 2013 alone.  NACHA publishes detailed statistics for each quarter that show the upward trend of the ACH volume overall and for specific segments. The most pronounced growth for 2014 were registered, among others, by web transactions and recurring payments. Today, the ACH network processes around 20% of the entire electronic transactions volume in the United States.

The future of ACH payments is more promising than ever. NACHA has been preparing assiduously for the gradual introduction of Same-Day ACH – a feature which will considerably decrease the settlement time of ACH payments. All parties involved, including websites that sell online, will benefit immediately from the introduction of Same-Day ACH by having the opportunity to access funds and make the delivery of their products and services faster. Since expediency is paramount in the online ecommerce industry, there has never been a better time for implementing ACH payments on your website.

Conclusion

ACH payment processing is a cost effective method to send and receive payments.  Benefits include:

  • Increased sales.  The more way customers can pay you, the more more money you make.  
  • Lower processing fees.  ACH processing rates are significantly lower than card payments fees.
  • Easy and simple way to send and receive money safely.

Interested in finding out more about ACH payments?  

Contact info@nationalach.com today

ACH Payments Unauthorized Returns

What is an ACH Unauthorized Return?

An unauthorized return for an ACH payment occurs when the originating depository financial institution asks for the amount  debited from the bank account of the buyer to be returned to the account from which it was withdrawn.

In most situations, the return is initiated when an account holder submits a signed statement (some banks require affidavits) to their bank in which they claim that the transaction is not authorized.

Unauthorized returns have a financial impact on your business.  Therefore, understanding and controlling them is important to protect your cash flow from your payment processing accounts.  

Most Common Unauthorized Return Codes

There are a variety of reason codes for unauthorized returns.  However, you’ll find that most of your unauthorized returns in your ACH merchant account fall under the following four return codes.    

  • R05 – Unauthorized Debit to Consumer Account Using Corporate SEC Code – this return occurs when an unauthorized transaction is submitted as if a business checking account was involved. The distinction between personal and business checking accounts is essential, as a business will have only 3 days to dispute the transaction, while a consumer will be able to do so in 60 days.
  • R07 – Authorization revoked by Customer – this reason code is assigned to a dispute when a payment was processed in spite of the fact that the account holder revoked it. This occurs most frequently for recurring billing.
  • R10 – Customer advises Unauthorized, Improper, Ineligible or part of an Incomplete Transaction – this type of unauthorized return can be filed with the financial institution in up to 60 days after the date of the transaction and it means that the account holder considers the payment fraudulent or incorrect.
  • R29 – Corporate Customer advises not authorized – This reason code is applied only when a business account is involved. It means that the account owner did not authorize the transaction or the ACH payment option is not enabled on the account.

Keeping a Low Unauthorized Return Rate

The unauthorized return rules were subject to considerable revision in September of 2015. One of the most important changes introduced a new unauthorized rate threshold that was decreased from 1% to 0.5%. Keeping a low unauthorized return rate should be a priority for any merchant that uses ACH payments because going over the maximum threshold of 0.5% can come along with risk evaluations and penalties.

Paying close attention to unauthorized returns and handling them as soon as they happen is a best business practice that should turn into a habit.  

If an unauthorized claim occurs, make sure you cancel the recurring billing feature on the customer’s account and contact them as soon as possible to understand the reasons behind the dispute. Since such claims are not always settled in favor of the merchant, providing another payment method to the customer who made the claim might reduce the risk of losing money for services and products that have already been delivered.

Conclusion

Recent changes in the ACH network rules regarding unauthorized returns make it challenging for all merchants, but particularly those classified as “high risk” to maintain ACH processing accounts.  As a result,  merchants in high risk categories and well as those classified as standard risk are using other technologies to process echecks outside of the ACH network.  

How is your business handling unauthorized returns within your ACH payment processing accounts?

Contact info@NationalACH today. 

ACH Payment Processing Powers Business Growth

ACH Payments Soar

Since the introduction of internet and telephone payments in 2001 and the advent of international payments in 2011, the ACH network put into place by the National Clearing House Association has expanded steadily.

Today, over 20 percent of all electronic payments carried out in the U.S. are processed through ACH processing.

The association released on April 15, 2015 a review of the last year’s results. The numbers show a considerable increase in the volume of ACH transactions for 2014, compared to the previous year. This evolution shows that the mechanisms put into place by the association, particularly its comprehensive risk management strategy and clear rules and regulations, are successful and create a safe and predictable business environment.

Overall, the number of transactions carried out over the ACH network amounted to 23 billion in 2014, a 5 percent increase compared to 2013. The growth trend of web transactions, debit and credit, is confirmed by these recent results, as the network registered an increase of 10.2 percent for this type of transactions.

The 4th quarter was the most successful, as web payments increased by 6.67 percent compared to the 3rd quarter of the same year, and by 12.66 percent compared to the 4th quarter of 2013. Recurring payments are progressively more successful, as their volume increased by 4.4 percent.

ACH Payments Compared to Cards

The success of ACH payments results from the many advantages they provide in comparison with card payments.

  • Many customers prefer to pay with an ACH echeck rather than a card.
  • Customers that don’t have cards or are maxed out on cards can pay you with an ACH echeck
  • If a card payment declines, echecks give customers another way to pay you.
  • Echecks are more stable for recurring billing transactions than cards. Bank accounts rarely change. Recurring payments continue without interruption.  
  • Customers expect to be offered more than one way to pay.  ACH processing is the most popular alternative payment option.  Millions of US consumers regularly pay for goods and services with electronic checks.  
  • Far fewer chargebacks are associated with ACH payments compared to cards.
  • High risk merchants can obtain echeck processing easier than card merchant accounts. 
  • ACH processing is cost effective with rates significantly less than card payments.    

Conclusion

Given the multiple benefits of ACH payment processing and its expanding share of the national volume of financial transactions, every business is wise to consider an echeck account to increase sales and competitiveness.

Accept checks online with a simple API integration to your website.  Accept check by phone orders.  And process mail and fax orders with a virtual terminal.

ACH payments are convenient for your customers.  And profitable for your business.  

Are you interested in ACH payments for your business?

Contact   info@nationalach.com today.

Fraud Lower for ACH than Cards

Decrease Processing Risk with ACH Processing

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 Payments 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.

Conclusion

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.

Interested in finding out more about ACH payments?

Contact info@nationalach.com today.

 

New ACH Rules for Unauthorized Returns

Changes to ACH Rules Move Merchants to Echecks

An essential indicator for ACH payments is that it requires constant monitoring is the unauthorized return rate. An unauthorized return occurs when an Originating depository financial institution (ODFI) debits the Receiving depository financial institution (RDFI). In some cases, the transaction may indeed be unauthorized, but system errors caused by the ODFI frequently result in an unauthorized debit.

The first important change with respect to the unauthorized return rate is due to occur on September 18, 2015 when the current 1 percent threshold will be lowered to 0.5 percent. Since the average Network unauthorized return rate is around 0.03 percent, the change is enforced solely to allow closer monitoring of institutions that have a poor performance.

The same concern for performance led to the development of the ACH Network Quality rule which intends to provide an incentive to ODFIs to decrease the number of unauthorized debits, especially the ones that occur because of system errors. In time, this policy will produce a decrease in the unauthorized return rate, thus reducing the costs for all entities part of the ACH network.

In short, the ODFI will be charged a fee ranging from $3.50 and $5.50 for each unauthorized debit. The fee will be transferred in full to the RDFI. The association decided to place more liability on the ODFI because this will motivate the institution to innovate and reduce the situations in which a transaction has to be returned due to incorrect data.

In addition, claims the association, even if the transaction is indeed reported as unauthorized, it is up to the ODFI to handle the situation with its own customer. The RDFI, on the other hand, does not have any power in preventing or solving the problem, yet it incurs losses and spends resources each time an unauthorized debit is made. The fee will be implemented starting with October 3, 2016. Until then, all ACH operators will have to put a system into place that will allow the transfer of the fees from ODFIs to RDFIs. In the long term, the ACH Network Quality rule will improve the services delivered through the ACH network

Conclusion

The changes in ACH processing rules are causing many merchants to switch to echecks based on Check 21 technology.

Since echecks are processed outside of the ACH network, you have far greater flexibility on returns and revokes. Giving you the benefits of electronic check processing.  Without the worries of ACH processing.

Are you a high risk merchant seeking an alterntive to ACH echecks?

Contact info@nationalach.com today.