In the Money Lending Business- Here’s What You Need To Know About Online Payments

Money lenders and loan servicing companies operate in trickiest part of the financial industry.  Not everyone can handle the higher risks and volumes associated with a lending business.

Whether you offer car title loans or payday loans, you probably deal with a lot of regulation and inherent risk. To survive in the industry, your operations need be streamlined and completely efficient.

The best place to start is with the infrastructure that allows your customers to pay you. Studies show that traditional forms of payment are on their way out. Plastic is simply more convenient than paying with cash. And paying online, directly from your bank account, is even easier than paying with a card.

Convenience is Key

Loan service companies and loan providers face pressure from both sides – government regulations and customer defaults.

The local authorities and regulators are tightening the rules around lending, which puts pressure on loan companies.

Meanwhile, a study in Texas found that over the course of a year, more than 54% of borrowers defaulted on their payday loans. A similar study in North Dakota found that 46% of borrowers had defaulted on their loans after 48 months. Here are the findings from that study:

• To deal with this problem, loan companies must innovate and offer convenient solutions to help encourage payments from customers.
• Moving payments online has the dual benefit of allowing loan companies to get access to bank accounts and making it easier for customers to payback their loans.
• The most convenient platform for online lenders and loan companies is Automated Clearing House or ACH.

ACH Payments

The reason ACH payments are so popular with loan companies is because it offers unparalleled convenience for both borrowers and lenders. ACH payments platforms allow the lender to automatically draw out the amount owed on a daily, weekly or monthly basis.

Borrowers who sign up for the service can have their dues paid automatically over the period of the loan. A writer for the New York Times found that this system of ACH payments encouraged borrowers to be more disciplined. Borrowers are put under pressure to manage their finance more carefully so that they can have enough money in the account to meet their living expenses and the automatic withdrawals from loan providers.

The infrastructure around ACH payments is designed for high volumes and regular payments. Some providers even offer services to let lenders get paid by checks over the phone, mail or fax, using a virtual terminal.

Convenience isn’t the only reason ach payments are better for loan providers. The payment platform is massive and the network handles close to 90% of all electronic payments in the United States. The ACH network is also considered to be among the safest and most secure electronic funds transfers system in the world.  

A study by SAP found that automated payments through echecks are less prone to errors and fraud, since there is minimal human interference in the whole process.

Conclusion

ACH payments reduce costs, assure that payments are made on time, stablize revenue from recurring payments, and are safe & secure. This makes it the ideal payment solution for lenders and loan companies across the country.

Securing payments and offering convenience to customers will do more than just help your business survive.  It will help your business thrive. 

How are you accepting payments from your borrowers?

Contact us today

Why Business Use ACH Payments

 ACH Payment Processing

The Automatic Clearing house (ACH) system is used as a secure means of crediting and debiting billions of dollars’ worth of payments every year. ACH payment processing is used widely in numerous industries for both business-to-business and business-to-consumer transactions. This article will explain what an ACH payment is, what they do, and how they can enhance your business.

What Is An ACH Payment?

An automatic clearing house or ACH payment is an electronic means of either depositing or withdrawing funds from a bank account. They can be used by businesses and consumers alike, and they make up a huge percentage of electronic transactions. According to statistics from NACHA, 24 billion payments were made via an ACH payment in 2015.  

How They Work

To initiate an ACH debit, the customer must give you permission to deduct money from a saving or checking account.  Authorizations can be obtained in written form, over the phone, or through a website.  

Once authorized, the payment is automatically deducted from the buyer’s bank account. The funds are then electronically credited to your business bank account. An ACH debit can be used for both one-time & recurring payments.

ACH credits are used to electronically deposit funds to bank accounts. 

 The Clearing House and the Federal Reserve act as the clearing houses for ACH payments  The payment process is automated. Once the account is set up, there is minimum effort required by you to send and receive payments.

What Are The Different Types Of ACH Payment?

ACH credits are used to send money to bank accounts.  For example, employers use ACH credits to direct deposit wages.  The government uses ACH credits for tax refunds and social security payments.  Lenders use ACH credits to direct deposit loans.  Businesses use ACH credits to send money to vendors,& refunds to customers.

ACH debits are used by billers to collect payments for utilities, mortgages, insurance premiums & loan repayments.  And millions of US consumers regularly use an ACH echecks to pay for goods & services online and by phone, fax & mail.

Businesses use ACH debits to accept checks online and check by phone, fax and mail orders.  Echecks are the most popular alternative payment method for American shoppers.  More than 30% of internet sites offer electronic checks at checkout.  The more ways customers can buy from you, the more sales you make

ACH debits are particularly effective for recurring payments.  If you offer subscription or membership billing, ACH payments are the way to go. Customers rarely change bank accounts, ensuring that recurring payments continue uninterrupted.  

Compare this to card payments.  

One in every five cards are reissued each year.  The card information has to be updated before a recurring payment is approved. Updating card information is time consuming, expensive, and gives consumers an unnecessary opportunity to cancel a recurring payment.  

Benefits for Businesses

There are major benefits to businesses who choose to accept ACH payments. These include:

• quicker payments
• reduced labor time
• fewer mistakes
• fewer resources required
• giving consumers an alternative means of paying for goods
• lowering processing fees, which is especially beneficial for recurring payments
• increased profits through lower fees
• better cash flow

Benefits For Consumers

There’s numerous benefits for consumers as well. These include:

• a reduced risk of fraud
• a greater sense of security for consumers
• less need to worry about payments getting mislaid
• providing a convenient alternative for customers who prefer not to make check or credit card payments

How to Accept ACH Payments

If you want your business to benefit from the many advantages of accepting an ACH payment, you’ll need to establish an account with a ACH merchant account provider.  

It’s easier to establish an ACH merchant account than card processing.  And rates are often significantly lower for ACH than card processing.

To apply for an account, you submit an application along with information about your business.  Once approved, you can accept checks online with a simple API integration.  And you can accept check by phone, mail or fax orders using a virtual terminal.  

Conclusion

Electronic payment methods continue to grow in popularity, and they offer numerous benefits to businesses and consumers alike. You benefit from improved cash flow, quicker payments and lower transaction fees.  Your customers get a convenient, secure way to make a one-time or recurring payments.  

How is your company handling electronic payments?

Contact info@nationalach.com today.

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

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. 

What is the Automated Clearing House (ACH) Network?

The ACH Network is an electronic payment processing platform through which monies and payment-related data flows.  The network is a safe, secure, method for transferring  consumer, business, and government payments.  Billions of dollars are processed annually through ACH, including direct deposits and direct payments.  The network is governed by NACHA Operating Rules, which give the guidelines to management risk and assure payment completion for all participants.

 Quick ACH Facts

• ACH is a batch processing system, not a real time system.  Financial institutions accumulate ACH transactions throughout the day for batch processing through the Federal Reserve at midnight of the following day.
• ACH eliminates the use of paper checks.  Instead, transactions are transmitted electronically, which translates into  faster processing times and substantial cost savings.
• There are 2 types of transactions processed through the network: Direct Deposits and Direct Payments.
• ACH Direct Deposit is used for primarily for payroll, employee expense reimbursement, government benefits, tax and other refunds, and annuities and interest payments. It is increasing being used by companies to pay vendors, suppliers and customers.
• Direct Payment electrictroncially transfers funds to make payments.   Consumers or organizations make a Direct Payments via ACH as either an ACH credit or an ACH debit.
  •  Direct Payments as an ACH credit pushes monies into an account. A good  example is when a consumer initiates a payment through his/her bank to pay a bill.
  • Direct Payments processed as an ACH debit pulls monies from an account.  An example of this is a recurring monthly payment for a mortgage, rent or utility bill
  • Both ACH credit and ACH debit transactions process quickly.  Settlement, or the transfer of funds from one financial institution to another to complete the transaction, generally takes only one business days, although it can take up to 4 days for end-to-end processing

ACH Network: Quick Stats

• In 2011, the ACH Network processed 20.2 billion transactions.
•  In 2011, the total dollar value of ACH Network transactions was $33.91 trillion.
•  In 2011, the ACH Network processed 9.48 billion ACH debit transactions and 6.60 billion ACH credit transactions.

For more information on how ACH can increase your cash flow, reduce expenses, and streamline your business operations, contact info@nationalach.com