Risk Intelligence
As the value and volume of ACH network payments continue to rise, surging financial crime statistics underscore the vital importance of verifying each and every payment to identify and mitigate potential payments-related risk.
The Automated Clearing House (ACH) Network is the US payment system covering direct deposits and direct payments. ACH payments are convenient, affordable and safe, allowing both individuals and businesses to process payments with ease across a wide range of transactions – from bill payments and direct debits to online payments for goods and services, tax payments and much more.
The network processes substantial volumes and value each year and is administered by The National Automated Clearing House Association (Nacha).
Both the value and volume of ACH payments – especially same day payments – continue to surge year on year: in 2024 ACH network payments in the US totalled over US$86 trillion.
These rising volumes are good news for all players in the payments space, bringing speed and enhanced efficiency for providers and customers alike. At the same time, however, surging financial crime – much of it relating to payments fraud – is creating challenges for payments players.
New threats continue to emerge – from AI-driven fraud to deepfakes, synthetic identities and more – and the numbers are substantial: synthetic identity fraud is projected to generate at least US$23 billion in losses in the U.S. alone by 2030[1].
Against this backdrop, identifying potentially illicit activity across the customer lifecycle is essential. Part of this involves verifying that ACH transfers are being made to legitimate accounts and verifying identity, but robust verification needs to be multi-faceted.
Remaining compliant with Nacha rules is non-negotiable and failure to comply can result in substantial financial penalties. These rules are constantly evolving, so monitoring for changes is important.
Understanding ACH payments
An ACH payment is an electronic transfer of funds between bank accounts processed through the ACH network. Here’s how it works:
- Originator: It starts with the individual or business initiating a payment request.
- ODFI (Originating Depository Financial Institution): The originator's bank sends the payment files to the ACH operator.
- RDFI (Receiving Depository Financial Institution): ACH operator receives payment and transfers it to recipient's bank account.
- Receiver: The account holder’s bank account is debited or credited.
Verifying ACH payments: 3 important steps
All users of the ACH network should ensure the authenticity and accuracy of payments. A typical process involves these 3 important steps:
- Account verification
Bank account verification refers to checking and verifying important details, such as bank account numbers and balances, about the bank account in question.
It also involves ensuring that the account is valid and in good standing, and that the individual you are transacting with is authorised to act on the account
Find out more about how you can verify the accuracy and legitimacy of accounts.
- Identity verification
Identity verification involves checking that all customers and vendors are who they say they are. Real-time identity verification is essential in the payments space to protect against fraud, but also to remain compliant with KYB and KYC obligations.
Robust identity verification should be data-driven and should use a combination of document verification and biometric checks – but it must also be quick, seamless and low-friction to protect the customer experience.
Poor onboarding experiences can cause up to 85% of customers to abandon the process.
- Ongoing monitoring
Ongoing monitoring of accounts is a crucial – but sometimes neglected – step. New risks can emerge at any time, but detecting suspicious activity early can help you to limit the impact of attempted fraud.
Towards a best practice approach
As global payments-related crime continues to rise, it has never been more important to fight back against AI-enabled fraud by implementing a best-practice approach to verifying ACH payments.
Click here to see how our solutions can help.
1. 2023 FSI Predictions Report, Deloitte Center for Financial Services
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