ACH Fraud: What Business Owners Need to Know
ACH payment processing refers to payments made through the Automated Clearing House (ACH), which is a federally regulated network of electronic transactions that allows banks to send money back and forth. Though advanced ACH security is heavily implemented by the National Automated Clearing House Association, ACH is no different than credit card processing when it comes to security risks and fraud. No matter what type of payment is being used, merchants and consumers must be aware of the risks involved. Read on to learn about ACH check payment processing and ACH fraud.
ACH Check Payment Processing
ACH payments are used for a variety of reasons, including direct deposit payroll, business-to-business transactions and e-commerce purchases. Employers can use ACH to transfer funds directly into employees’ accounts, eliminating the hassle and costs of traditional paper check processing while offering an added convenience to employees. Additional ACH benefits include:
• Businesses can expand their customer base to include consumers who do not have credit or debit cards.
• Consumers can also use ACH check payment processing to pay mortgage bills, loans, utility bills and insurance premiums.
• Recurring billing and electronic invoicing allows businesses to cut costs and reduce late payments, while customers enjoy convenient account management.
What is ACH Fraud?
ACH payments must be authorized by the account holder in order for the payment to go through. However, ACH fraud occurs when unauthorized funds are transferred into a bank account. This fraud can be executed if someone gets a hold of an account holder’s account number and bank routing number. The funds can then be used for fraudulent activity, leading to devastating loss for both consumers and businesses.
How to Avoid Fraud
Thieves often obtain account numbers and other sensitive information through phishing emails. These types of emails are disguised with official-looking logos to resemble a real company or financial institution, or can even appear to be from a friend or colleague. The email prompts the reader to release private information, such as account numbers, user names and passwords, or includes a link to a site that collects the information.
Consumers can avoid their information from being compromised by recognizing these types of scams, and understand that financial institutions will rarely, if at all, ask for passwords or account information through email. Merchants and businesses must also be aware of these types of ACH fraud. Monitoring ACH payments closely and implementing PCI compliant security precautions to keep data safe are crucial to saving money and protecting business.