ACH Verification: Why and How is it Done?
A new world of sending and receiving funds has been created thanks to electronic payments that are processed via the Automated Clearing House (ACH) network. Paper checks and cash are gradually being replaced by this more convenient, efficient, and speedier payment processing method.
However, while it is more efficient, there is also a higher level of risk associated with ACH payments. Companies that accept real-time payments through the Automated Clearing House will also be facing a range of risks that should be appropriately managed by having a solid verification process in place for ACH payments.
What is the Process for ACH Verification?
What does ACH stand for, and what is the verification process? First, let’s start with what does ACH stand for. ACH stands for Automated Clearing House, and it is a faster and more efficient way to send and accept payments directly from bank accounts. The process for ACH bank account verification refers to a process that should be in place as a precaution for digital safety, that sellers will use to minimize their level of financial risk when taking or making payments in-person, online, or in store. It is in place to allow businesses to get a real-time verification of the customers’ bank account, reducing the risk of fraudulent or faulty payments.
ACH Transfer Challenges
ACH transfers present a range of different challenges in comparison to other payment types such as cash or credit card. For example, companies that accept credit card payments will receive authorization each time a payment is made with a credit card, either in-store or online. This guarantees that there are the necessary funds ready on the credit card to pay for the transaction.
However, the same guarantee is not provided for ACH transfers and payments. Because of this, verification steps are necessary.
Reasons to Verify the Customer’s Account
Adopting electronic ACH verification services can have significant benefits for businesses. These include:
- Reduce Bounced Payments: The process for ACH verification can provide more information on whether the account is associated with a suspicious number of checks that have bounced in the past.
- Reduce Cost: Accepting ACH transfers means that there are fewer paper checks coming through, reducing both time and money in processing.
- Ease of Use: ACH verification can be used at many different payment venues, including e-commerce, mail order purchases, in-person shopping and much more.
- Lower Return Rate: With electronic verification, there is a lower risk of data entry mistakes, which are a common cause of declined payments.
How to Verify an Account
There are several options that companies can use to verify a customer’s account. These include:
- Instant Verification: This is possible for customers who have immediate access to the internet. They simply select their bank name from a menu, and then connect to their online banking account.
- Microdeposits: This is the most popular option for ACH verification. It involves sending one or two small deposits, usually a few cents each, to the bank account. After a couple of business days, the customer will then verify the amount sent to them.
Accepting ACH payments is a quicker, more efficient, and lower-risk option for many businesses. However, there are some risks involved, which is why a strong verification process for the bank accounts behind the payments is needed.