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Same-Day Payments

Same-Day ACH: What You Need To Know

ACH, the network that makes it possible for organizations to make direct deposit, payroll, and vendor payments, just got a substantial upgrade. Historically, most ACH payments were settled within a few business days. Now, the infrastructure exists for same-day settlement. What’s more, all Receiving Depository Financial Institutions (RDFIs) will be required to accept these same-day payments.

But with faster payment processing comes greater risks. Find out how same-day ACH can make some popular scams more effective and how you can keep yourself, and your money, safe.

The Case for Same-Day ACH

After conducting an analysis of same-day ACH data, the National Automated Clearing House Association (NACHA) found that no financial institution has reported an increase in fraud due to same-day ACH. This is heartening since, according to the organization, B2B payments are increasing at around 15 percent per year.

In making its case for same-day ACH, NACHA has presented eight primary use cases.

  1. Payroll
    Same-day ACH will allow faster payroll payments for hourly workers and will also enable faster payments of bonuses or emergency payments.
  2. Urgent Claims Payments
    For insurance claims, same-day payments will allow people who are recovering from an emergency to receive the funds they need in a timely manner.
  3. Person-To-Person Payments
    Family members and friends can send money to one another through their financial institutions, easing reliance on third-party payment companies. These companies aren’t required to follow the same rules as bank do, nor do they have the same oversight.
  4. Account-To-Account Payments
    Moving funds between accounts at different institutions will be faster and much more convenient.
  5. Collection Payments
    Same-day payoffs on past due accounts will eliminate the daily fees that are accessed while the payment is being processed.
  6. Online Payments
    Faster payments to eCommerce entities
  7. Faster Check Conversion
    Same-day ACH will make paper check conversion viable for more merchants.
  8. Merchant Debit Payments
    Faster acknowledgment of consumer payments.

Almost all types of ACH payments are eligible for same-day processing with the notable exception of international transactions. In addition, amounts more than $25,000.00 are, for the time being, ineligible.

Potential Risks

In a perfect world, this leap in payment processing speed would be nothing but cause for celebration as the gears of commerce are greased just a bit more. However, as with any leap in technological progress, it’s prudent to take a step back and consider the possible weak points. Take the rise in Business Email Compromise (BEC) scams, for instance.

In this scheme, bad actors trick businesses into paying invalid invoices. Unlike many other scams, which rely on volume, this scheme requires grooming. Scammers spend considerable time targeting a company’s officers, making persistent phone calls or phishing emails over days, weeks, or even months. This type of operation is known as “spear phishing,” so named because it requires the perpetrator to target specific individuals and attempt to extract either money or information from them.

According to the FBI, BEC attacks have been increasing over the past year, and from 2013 to 2018 have cost business owners a combined $12 billion. Of that, roughly $3 billion came from U.S. businesses. The hardest hit sector appears to be real estate, with a 1,100 percent increase in attacks between 2015 and 2017 alone.

Here’s the kicker: BEC scams and others like it will be brutally more efficient in a same-day ACH environment. Victims will have less time to react when they realize they’ve been scammed. This certainly isn’t an argument against faster payment processing times. Progress must be made. But, organizations are advised to educate themselves on how these scams work. Forewarned is forearmed.

Don’t Be Complacent

As transaction times accelerate, the threat of fraud becomes more significant. Falling for a scam even once can be much more damaging. Merchants will have less time to identify suspicious behavior and to act on those suspicions. Another thing: many organizations are overconfident in their ability to protect themselves.

Unlike many other scams, BEC scams don’t rely on the 1 to 2 percent of people who respond to obvious scam emails. These schemes require weeks of back and forth between the perpetrator and the, usually, highly educated victim, during which time the perpetrator builds rapport. They build so much confidence, in fact, that the perpetrator eventually sends wiring instructions along with a fraudulent invoice.

Overconfidence among organizational officers seems to stem from a belief that banks will have their backs if they get scammed. However, in corporate payments, at least, this is not guaranteed. Regulation E does not call for the same protection from fraud that is supplied by the Uniform Commercial Code. The key, then, is for organizations to remain vigilant. Bad actors are locked in a constant battle with IT teams and their countermeasures. Every system is vulnerable. Doubtless, same-day ACH will prove a boon to business, but it can also enable bad actors to disappear with your money all the faster. Be on guard.

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