Webinar Replay – ACH Positive Pay: Uniting FIs and Businesses Against Fraud

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ACH Positive Pay Uniting FIs and Businesses Against Fraud Transcript

October 22, 2024
Brynn Johnson   0:08
We are so excited to get started.
My name is Bryn and I will be your kind of chauffeur through this webinar and we are just gonna wait a little bit longer for people to come in.
And we’re really excited to chat with you today.
Before we get started, I would love to see in the chat if if you could drop in the chat. Can you hear and see everything? OK, you should be seeing a slide deck and you should be hearing my voice.
Alright, I love to see it.
Fantastic. You’re all getting a pluses so far, and that also leads me to the fact that we are on teams and teams has some great functionality, so you’re already showing me that you know how to use the chat, which is great.
This is where we will communicate back and forth and feel free to ask questions throughout and we’ll have time for Q&A at the end. And then also note that we also will have a few polls, so teams.
Allows us to have polls throughout this conversation.
And those are a really nice way for us to just keep the the conversation interactive and us to know more about you and make this as personal as possible.
Great.
Well, we are at the top of the hour and then of housekeeping we get. We’ll get this question because I know, I know that this content is going to be fantastic from these speakers. We will provide the recording at the end of this probably tomorrow as it takes.
Time to transcribe and we will also be providing access to the slide deck.
And then a little bit later, we have a really special asset that we’re sharing as well from AFS that will support you on your journey as we learn about positive pay and ACH positive pay.
So no need to worry.
No need to scramble and take screenshots or take notes.
You will get follow up materials so you can refer back.
All good, great.
So we are going to get started.
Let’s see.
I just want to make sure people that are waiting in the lobby are able to get in.
OK.
Well, why don’t we go ahead and get started? So as I mentioned, my name is Bryn Johnson and I am marketing at Advanced Prod Solutions and I really will be kind of the orchestrator.
I’ve got many many screens here and I’m watching to make sure everybody has what they need as we go through this webinar, but really we’re here to talk about ACH, positive, ACH positive pay and how.
Financial institutions and businesses can unite together to fight fraud, and we’re going to specifically talk about that a chapter, positive pay angle. And we’re really excited about that angle today.
And we’re really, really thrilled to be partnering with NACHA on this.
We are a NACHA preferred partner, and it’s just a partnership that continues to to benefit us and then benefit all of our customers as well.
So I’m really thrilled to be partnering today with NACHA.
So as I mentioned, we have some really, really fantastic speakers today.
So, Jordan Bothwell, she is VP of strategic partnerships here at AFS.
Jordan is has been at AFS for.
For a very long time and she knows her stuff in fraud prevention and positive pay and pretty much everything and anything you would want to know about fraud prevention in this industry.
And Amy Morris, she is somebody that we are thrilled to be working with and have worked with in the past.
Amy is from Nacha.
She’s the senior director of ACH network roles.
So she knows the rules and she knows everything you would want to know about ACH and she has over 25 years of experience working for some very large FIS and if you.
If you’re a person who watches webinars in this industry, Amy’s kind of both Amy and Jordan are kind of celebrities.
They really are fantastic webinar leaders.
So happy to be here.
And why don’t we just dive in and we’re going to be talking?
Actually, what I’m going to do first is put up a poll and then Jordan is going to talk.
So while Jordan gets started and talks about the threat of check fraud, watch for a poll.

Jordan Bothwell   4:25
Thanks Bryn.
Hi everybody.
Yeah. While Brent’s pulling that pull up, would love to hear kind of from the group here today.
Just a representation of of who we have the pleasure of meeting with.
So just tell us a little bit about your role within your fi. Maybe how.
Fraud impacts how you know positive pay impacts your role at your financial institution to just help us know how to, you know, answer some of these questions that come up.
So just to kick us off what we’re gonna talk about is the.
Kind of constant threat that check fraud.
Delivers to the market, to financial institutions, to businesses and why ACH is a good option to help quell some of those those check fraud threats that are persistent across the market. So when we think about check fraud in general, right as we we look at the.
Kind of the headlines, right?
Southern California business owner loses $14,000 in a check washing scam, right?
We hear every day from institutions.
How are we dealing with check washing?
Check washing is a big problem.
What’s the best way to prevent it and check for just remains kind of an ongoing threat even as check usage declines.
So one of the things I always like to talk about when I talk about check fraud in general is that even though the number of checks and circulation is declining, the amount of threat and fraud associated with those checks and circulation is increasing.
So when we think about the information that the Federal Reserve puts out about commercial checks that are collected through the Federal Reserve.
Just some stats. The most recent quarter that they released information on was related to Q2 of 2024 and the average value per check in dollars is about $2800. Just to put it in perspective, when we think about the first quarter of 20.
20 that dollar value was just shy of $2000 as $1900. So basically over the last.
Four years, the average check in circulation has increased nearly $1000.
So what that means is that, yes, even though the average check usage is on the decline for every check that’s still out there in circulation.
The threat to the financial institution and the threat to the business is even greater because each dollar value that’s out there is higher and higher.
The other thing to think about is the kind of unknown cost of fraud, right? The non dollar value on the actual check itself.
But all of these soft costs involved with fraud.
So there’s also a stat that I like to reference a lot, which is the true cost of fraud, and that stat basically says that for every dollar value, that or every dollar that in a financial institution is susceptible to for the actual face value of the check it.
Actually costs them nearly $4.50 overall, right?
So when you think about what is your, you know, fraud number that you’re keeping track of at your institution at your business, how much money are you?
So, you know, losing when it comes to fraud.
Actually think 4.5 times that amount because all of the other soft costs involved in reputation in employee, you know, employee time and energy that they are taking to try and recuperate those funds from a fraud prevention perspective.
All of those things add up, and so you know, digital alternatives can help dissipate some of that dollar value that we’re talking about when it comes to, you know, check fraud.
I joined like Brint said back in back in 2012.
And every year when I have been here, it’s always the same thing.
Hey, you know, check fraud checks going away?
Check fraud is gonna dissipate.
I’m still here 12 years later and we still have check fraud.
So it’s it’s just an ongoing threat.
So continuing the conversation into, you know more about the truck fraud market on the next slide, when we think about just some more stats right, 65% of organizations experience check fraud in 2023, right?
So that’s a it’s an alarming number.
Most of the institutions out there are experiencing trek fraud. In fact, 80% of organizations were victims of payment fraud, specifically trek fraud, with 65% of that, and of those, 20% had to do with the USPS Mail services, right?
So checks that are coming through the mail, which are often, you know business related checks not so much personal checks but business related checks.
Are impacted by kind of that blue box, fraud, postal, postal many.
A postal mail services fraud, right?
So again, going back to check, washing checks are being stolen out of the the mail information is being modified or stolen from that, and then fraudsters are using that to perpetrate fraud schemes, whether within that check fraud realm or elsewhere. Right, without specifically talking about check fraud so.
Really vulnerable form of payment. Anybody kind of with a access to a printer at home with access to you know tools to modify that check. It is able to perpetrate a check rod scheme so it doesn’t take a highly sophisticated fraudster to be able to perpetrate check Fr.
It’s really easy, and fraudsters tend to go to the path.
At least resistance.
You know, we have seen a shift in, in the business realm for companies like Whole Foods and Target who are no longer accepting checks due to this increasing fraud risk.
So it is a consideration, right that major retailers are moving away from, from trucks being accepted for payment, but that doesn’t go away from the fact that a lot of these businesses are still using checks to issue vendor payments or to issue payroll, right?
So even though they may not be accepting it at their place of business, they are still using those checks to facilitate payments within their organization.
So you know, we are making strides to as institutions as entities.
Recognize the outdated kind of payment method.
That is check fraud.
We’re we’re, you know, making improvements. But there’s still again, like we talked about a lot of checks and circulation.
And it still represents a lot of money that’s being moved across the network.
But kind of the the topic of today’s conversation is knowing the the vulnerability that is the check fraud space or checks in general.
You know what are some alternatives that you can employ, such as moving to more ACH payments and and how a positive pay solution can can help with the fraud and mitigating it across you know the ACH payment network so.
Let’s kind of transition and talk about when we move from checks to ACH, it is a more secure solution.
And so I’m really excited to hear.
Kind of what Amy has to say about, you know, the the ACH network, the volume of of of transactions across that network and how that translates to, you know fraud or or risk associated with it.

Amy Morris   11:43
Awesome, so I’m really happy to be here with you guys today.
And the shift has definitely been occurring over the last several years.
We’re seeing more and more B2B payments over the ACH network. Really one of the catalyst for that was the pandemic and when folks were locked down, there were a lot of processes that could not be continued as business as usual and that has resulted in a.
Lot of automation.
A lot of automation efforts for organizations and payments is a significant part of what we’re seeing. We’ve been seeing significant growth in the network.
We actually we had kind of some some outside influences on the ACH network volume, one of which being the pandemic and some of the benefit payments that resulted out of the pandemic.
That kind of shot our volume up and then when those payments ceased.
It kind of, you know, took a little bit of a dip, but now we’re seeing the normalization and so last year in 2023, there were over 31 1/2 billion payments processed through the ACH network.
So you see why it’s, you know, very important for us to be here talking about things like safety and security rules because the ACH network really is the backbone of of.
Payments in the economy here in the United States, so.
We saw almost a 5% growth in the number of payments in 23 / 22 and we had over $80 trillion. Those 31 1/2 billion payments represented over $80 trillion in 2023. And so, yes, we are really reflective of.
The trustworthiness and the stability of the ACH network, and we are going to talk about.
You know, some of that security number one, you don’t have pieces of paper flying through the mail.
Or fax machines.
Or, you know, things of that nature.
Sensitive information is kept inside of very secure systems.
Our rules are, you know, very fraud and security focused. And so our participants play a huge part in keeping the network safe.
We’re going to talk some more about, you know, some of the fraud that was mentioned earlier.
And how we can combat that and prevent things like check fraud information being stolen?
Of checks from seeping in to the ACH network because we’re not slowing down.
We just released our third quarter numbers and in the third quarter of this year alone, the network process 8.4 billion payments for 21 1/2 trillion dollars.
So we are.
That means that we are on pace for an even higher percentage of increase this year, so.
Third quarter of this year compared to third quarter of last year was an increase in of 7.4%.
In the number of payments an 8.9% in the value of those payments, which again is reflective of those larger payments.
So those B2B payments. So if we go to the next slide.
We can focus in a little bit more on what we’re seeing in the B2B space. So in 23 and almost identical in 22, we had almost an 11% increase specifically in AB2B payment.
And I’ll also mention that same day ACH is continuing to increase as well and we’re seeing the the second highest driver volume in each are also B to B transactions.
So and again, we’re not showing any signs here of slowing down in the third quarter of this year.
B to B volume was 1.9 billion, which is an increase of 12.6%. So even higher than the.
11% we have have been seeing and then I mentioned same day ACH that total volume total volume of same day ACH is actually up 67 1/2% compared to last quarter. And then as I mentioned, with B2B being the the second biggest.
Driver of of that growth.
So why is this?
Well, first of all I want to mention there’s several things that I’m going to be pulling through.
From a guide that last year we put out.
Out with AFP.
It is called the AFP payments guide to ACH what corporates need to know.
So I’m gonna touch high level on some of these things, but there are other resources out there where you can.
But efficiency and cost, I think that’s always been the key to the ACH network and for ACH network participants, even without the additional costs of fraud and recovery and other administrative things around check processing.
AFP studies have found that ACH is, you know, at a minimum, three to five times cheaper than handling a check.
The workflow automation in the straight through processing I mentioned a lot of organizations are are starting to really look into more automation for their AP and their AR functions and so the ACH transactions can handle can accommodate the information that is needed for cash application for Recon within.
The actual transaction itself, so that makes it much easier to bring into that workflow automation. And you know, the Holy Grail is always straight through processing.
We want to be able to apply those payments without having any kind of manual intervention.
Security and control we’ve kind of touched on a little bit, but again this is you know #1 tinatch is to maintain the security that we have within our network and you will notice that through our rule making, we recently this year passed a bunch of of new.
Rules.
Around risk management and are continuing to beef up the the existing ones, whether that’s around originator practices, data security, making sure that all information all account information in particular is rendered unreadable.
Whether that’s at rest or in transit.
But also some of that control around the network.
One thing that you know folks really enjoy of the ACH network is that we do have the capability to recall or reverse.
A payment when there in fact has been an error and so also the understanding of the scheduling around ACH really provides a lot of control for users of the network, whether that’s sending payments or receiving payments and then high visibility, a lot of folks that are participating in.
The ACH network, again on the sending or the receiving side, really enjoy.
What those established schedules and end the number of?
Options throughout the day to settle ACH transactions. What that brings to the ability to forecast cash positions as well as the increase in cash flow.
Of the actual funds that that they’re bringing in and so some of those, those are just some of the drivers as to you know why folks have been making the switch over from paper, including of course you know really #1 being you know we want to get.
That that check out of the mail. Right. So on the next slide, these are again taken out of specifically that AFP guide, but also we have other resources on the Nacho website that can really help you with, you know reducing payments fraud.
But number one on the list, look at that ACH positive pay.
So I’m not gonna spend a bunch of time talking about that today.
I mean right now, because that’s what we’re here to talk about today.
But really, that’s providing you protection against those unauthorized ACH debits. If one should happen to come through, but some of the other things that we call out and this is important to understand whether you are an organization that is originating ACH payments or if you’re at an F.
And you’re servicing?
Those organizations, things that you can talk to customers about, making sure that there are strong internal controls and all of these are things that are required under the ACH rules for all participants. But in those internal controls include a separation of duties.
So you’ve got one party that’s entering transaction which is separate from parties that are doing the approval of transactions and having different thresholds and and and different.
Bacteria for various levels of approvals of those transactions and then a separate person for Recon as well.
Also talking about separation, separating accounts for collections and disbursements.
This can help with with some of your payment flows can help keep your debit accounts more secure when you’re using things like positive pay.
Also, if you do continue to write checks for any reason, you still need to have a checkbook around.
Meeting that account with the checks on it from the account that you’re using for ACH also keeps that account number. If something does happen to the check in the mail separate, you can have an ACH block on that check only account.
So there’s a lot of good reasons for for separating that. If you must continue using any kinds of checks after you move over to ACH transactions.
But also good practices or having a clear on boarding processes.
And again, this can be for.
Financial institution for a vendor or for an organization. When dealing with your own customers. This is stuff like you know, good due diligence and making sure you understand the organization that you’re doing business with.
Akin to sort of your your AML, BSA types of of processes. And then again you can find more information. Sorry, go ahead.

Jordan Bothwell   22:24
Sorry, Amy, I was just gonna say on that topic of validation before that first ACH transaction. I think that’s really important to not just validate that the account exists, but also that that person is, you know authorized to transact on that account.
You know, that’s really important to to validate, you know, through a number of different, you know, security measures. But you know, credentials can be, can be stolen right from.
Fraudsters and so not just validating that that person can.
To validate those microtransactions, but that they are who they say they are, right at that point.
So that any transactions that happen after that you at least know that.
Hey, that person who owns that account was the one who was setting up that ach, you know, payment facilitation, and then, you know, from there just validating that, hey, does this individual transactions are good? But at least if we’ve done that at the top, we know that that.
Person.
Has said yes.
I am authorizing that this, you know, exchange of payments be be established.
Because that’s a really important factor, I think in in heading off at the pass, some of this fraud, fraud attempt, I should say.

Amy Morris   23:34
Absolutely. And I mentioned those rules that we passed earlier this year, they’re gonna be coming into play in 2026 and and on the initiation side, we do have we require risk mitigation processes. We don’t specifically call out account ownership, but we call out what is reason.
For that organization.
And so, yes, you’re absolutely right.
So in addition to account validation which is required for online.
Debit.
Transactions in the consumer space.
We are, you know, continue to continuing to extend our rules to talk about, you know, account ownership, all those kinds of things.
When we’re really looking at origination as a whole.
So these rules don’t just apply to consumer transactions.
They can apply to B to B transactions as well any any ACH origination.
And so there are other things, you know that can be done.
Even outside of the network, and like I said, we’ve got some good resources in our risk Resource Center on our website, some good publications that talk about you know how originators can make sure that they have a separate process to verify any changes that are being made to.
Payment instructions.
So sometimes we have to go old school there, not just rely on an e-mail that was given to us or an e-mail that could have been compromised, but perhaps pick up the phone.
To a known phone number, but out of band type of processes to make sure that any changes to those instructions are legitimate.
Daily reconciliation is very important to make sure that nothing weird going on in your organization, but also to make sure that nothing that you didn’t intend has posted against your account because the ACH network has features and functions that can allow.
For the resolution of those types of issues, but there are time limits and so daily reconciliation is is very important.
And then, of course, you know, we’ve got to train our employees. If you’ve got, you know if you’re doing ACH transactions, you should have a rule book or access to the rules online and and have at least one person definitely responsible for staying up to date on on.
Rule changes and we’ve got, you know, our audit processes are risk assessment processes that are all required and all of that should.
You know, include training for employees and ongoing.
Training and then understanding how important it is to adhere to those procedures and what could happen as a result of veering away from them.
So lots of tools and things that are available out there for folks that are using the the ACH network and and to as I said, you know really keep the quality and the security of the network strong.
At at all times.
So let’s go ahead and move on and talk about I promised we would come back to the positive pay. So please.

Jordan Bothwell   26:41
Awesome.
Yeah. So that first kind of first line within how do we, you know, protect these ACH payments was having a a positive pay solution, right? So it is kind of the next level of protection in both check and ACH, you know fraud prevention, it can help prevent check.
Washing.
And, you know, perpetrating fraud across both of those, those payment channels.
So maybe you guys can share just a little bit about what your institution is offering today in the way of of a positive pay solution.
Do you have one?
Do you not have one?
Are you in the process of implementing one? And then maybe in the chat?
You know what?
Your thoughts are on that institution or that that system. If you, if your institution has one you know is it.
Does it have some gaps?
Are there, you know, questions we could ask answer today about different features that you know, maybe your positive pay solution doesn’t have, but that you know you see.
A gold standard solution having right?
And then we can speak to that specifically.
So go ahead and ensure the results or share your your information as we continue to talk today as we go through these slides.
So when we kind of think about not just approach, you know an ACH positive pay solution supports that approach to enabling the institution and the business to unite against fraud.
So when we look at that next slide.
Brandon, to kind of talk about that communication between the odfi and the rdfi.
It’s a it’s really a strategic conversation of a positive pay solution can be that communication source to basically prevent a an institution from clearing an unauthorized transaction on either side, right?
So this solution an ACH positive pay solution specifically is going to look at the.
Different transactions that are coming and going and validating that hey this.
Transaction is authorized and and basically if it’s not then then cut off that payment at the past right? So we don’t have to deal with reversing, you know on the back end we we basically prevent that transaction from from happening and focus on the good transactions and FAC.
Those more, more quickly, right, and more expediently.
So what is an ACH positive pay solution?
So I like to think of it as we go to the next slide as a system of record.
A rule based real time system that’s going to allow business account holders to review and approve transactions before they clear right.
So when you think about ACH transactions, as Amy mentioned, there may be different accounts for payments as or outgoing payments. As for in going payments. But on those different accounts you know vendor payment accounts or payroll accounts that you may have set up for ACH transactions, you’re Bas.
Gonna set up rules and those rules are going to say what an authorized transaction look like.
So this ACH positive pays solution basically says that if I see a payment come through on this account and that payment meets these criteria, then it’s authorized.
So it may be a criteria related to dollar value, right?
So a payroll dollar value criteria that you may think about would be?
You know my my payroll is never going to be higher than X amount on a per transaction basis, right?
So I’m never going to issue a payment that’s greater than that. If I do see so one that comes through.
Then the ACH positive pay solution can take an action on that item to to basically reject it, so that so that that institution is not processing a payment that the business has not authorized, right?
So there’s kind of a review process there.
Other examples might be for vendor payments, right?
Here’s my approved list of vendors that I issue payments to. If there’s anything on you know transaction wise that has a vendor different from these approved authorized vendors.
Then that’s a a transaction that would get flagged, right? That is outside of what we expect to see. And that’s essentially a not authorized payment. So one of the things that when we’re working with institutions that they share is you know, maybe the dollar value isn’t anything that.
You know, abnormal out of out of band, but instead of issuing that dollar value payment to an approved authorized vendor.
A fraudster you know, an internal.
The Fraud survey, we’ve got internal fraud as well. They may issue that payment to themselves or a meal account, right?
So you know when you’re looking at your overall Ledger, the dollar value’s align.
However, that payment never went to that vendor.
It went to, you know, a fraudster or somebody who’s working with a fraudsters account, right?
So those are the types of things that an ACH positive pay solution can flag because you know, if you don’t have somebody.
Who’s looking at all of the details of every transaction?
Those are the things that might get missed.
Without an ACH positive pay solution.
Because again, overall that that picture looks to be in line.
Hey my my total payments for the month were $10,000, but unfortunately you know $2000.00 of that $10,000 went to the wrong spot. And so you might not notice that until the vendor comes calling and says, hey, we never got this payment you.
Know you look on your Ledger and see. Oh, we did issue payment, but it went to the wrong spot.
Right. So an ACH positive pay solution is doing this all in real time.
We’re looking at that transaction.
We’re validating that it’s going to an authorized source that that business has said, yes, this is good. This is authorized and it’s preventing those losses from occurring.
But it’s not just important to look at a positive pay solution. It’s important to look at the right ACH positive pay solution.
So again, we work with at AFS over 1000 financial institutions. So we hear a lot from what the existing solutions have out there, what they’d like to see and and so some of the things that we would like to share today are just you know what?
What you’re looking for in the right positive pay solution.
So one of those would be rules based processing.
So like I talked about today, having the flexibility to say on this account here are the rules I wanna set up because it’s a payroll account versus on this account.
Here are the rules that I wanna set up because it’s a vendor payment account, right?
So custom rules for those different accounts or different vendors within that account, right?
So a certain vendor you may issue payments to every 30 days.
Certain vendors you may issue payments to once a year, so if there’s anything that’s outside of that realm, then you want a positive pay solution to flag that.
But the important thing is not having to have a one-size-fits-all right? Being able to.
Optimize and customize the rules that you’re gonna configure.
Based on the account that that’s uh that that payment is uh, you know, going to or or coming from?
When you’re looking for a solution, you know integration is key, right?
And that integration could be API integration.
It could be SSL integration.
You want your business.
Who’s reviewing these?
You know exceptions or setting up these rules to be able to access what they’re doing today.
So having those those two systems talk to each other, it is really key, right?
So instead of having to log in to a separate system.
To review these transactions, look for something that’s going to be incorporated into their process today so that they can continue on with their normal process, but have that added layer of security.
Cross device compatibility.
So this is a big one, right? As a business owner, you may not be sitting at your desktop all day to set up these rules to review. You know, exceptions to make a pay, no pay decision.
And so having a solution that will preemptively, you know, provide text message notifications, e-mail notifications that you can access from your phone. You know, while you’re on a job site while you’re going to a client meeting.
To be able to say yes, this is good. No, this is not good.
It is really important because if you don’t review that until the end of day or the next day when you get back to your desk, you know that defeats the purpose of having that real time review. So making sure that the solution that you’re looking for scales really.
Well, for that businesses ease of use.
And then you know scalability, right?
So having a solution that’s going to work today, yes, but it’s going to work tomorrow and next year as well.
So it’s not just going to meet you where you’re at, but it’s going to meet your meet you where you’re going to be in in the foreseeable future.
So having a partner in that solution who’s going to work with you to identify the areas for improvement, you know the the different business needs that that may surface because you know one business does not operate the same as another business.
So once you start onboarding businesses for a positive pay solution, ACH positive pay.
Specifically, what’s their feedback and how can you work with that partner to make sure that that business continues to, you know, trust you as their financial institution because you know the concept of positive pay, you know is is shared right across across the the industry and so making.
Sure that you are offering a solution to your businesses that’s going to continue.
Their relationship with you versus going somewhere else, right? Making sure that.
Their payments that their funds are in a secure environment is really important so that they don’t try and, you know, get that through somebody else who’s offering it. One of your competitor financial institutions.
So as we kind of transition to the next slide here, maybe just take a minute to share.
About kind of your financial institution strategy when it comes to business banking.
Are you currently established?
Have you not gotten into that realm?
Are you growing into it?
Maybe again in the chat, just share a little bit more about what that looks like, what considerations you’re taking into.
When you are reviewing your business making strategy is ACH positive pay something that’s already on your road map?
Is it something that you hadn’t thought about today?
So some other considerations.
Real time alerts, right?
We talked about that a little bit when in regards to those e-mail notifications, those text message notifications, again at the point of presentment, at the point of of transaction occurring, is when we want review to occur.
So make sure that those those notifications are real time and like we talked about. Yeah, Amy.

Amy Morris   37:36
Sorry, Jordan, I was just going to jump in on notifications.
I think that that’s really an important consideration. I mentioned when I was talking about ACH and same day, you know, right now we’ve got 4 settlement windows throughout the day, same day Windows are a little bit shorter.
So if we can make decisions more quickly, we can return those transactions back out of the accounts even more quickly.
And then right now, NACHA actually has a request for comment out to the industry to the public.
Anybody can respond and we hope that you do.
Talking about adding an additional same day ACH window that would be later in the day, so notifications upon presentment I think are really really key not only for security purposes but you know also because of the speed of transactions these days.

Jordan Bothwell   38:30
Yeah, that’s a good point.
And and when you think about just the overall business strategy?
You want to position yourself as a financial institution to not compromise service in the sake of fraud prevention.
So not only can you respond to those potential, you know, fraudulent attempts sooner, but you can also facilitate good processes sooner as well, right?
If if those businesses are responding, you know, within that window of of opportunity that we talked that Amy just talked about.
Then you can meet that that next window, right?
And you can facilitate those.
Those payments more quickly, rather than waiting until the next window to open up.
And so it’s it’s, you know, both ways, right.
Yes, you want to have that review process, but you also want to make sure that any good transactions can facilitate, you know, as quickly as possible to to benefit your business.
Think it’s a good point.
And then you know, rounding back, like I said, positive pay solutions exist in the market today.
So you wanna make sure that when you’re looking for the one that’s going to fit your needs, look for, you know, all these things that we talked about, but the one that’s gonna adopt be adopted by your businesses, you know, widely and quickly because you know what we.
We talked about today is a positive pay solution.
Yes, is a cost saving measure because you’re preventing fraud.
But it also has the potential to be a revenue generating solution as well for your financial institution, your Treasury management department, because it offers an additional level of service on your, you know, business banking account, right.
We talked to institutions who offer a positive pay solution as a higher level of of business account, right?
So you might have a basic business account model, but then you have a an elevated option which has positive pay and it you know addresses the need that a business has.
Make sure that fraud isn’t perpetrated on their accounts. They don’t have to reissue account numbers. In the case of a fraud occurring, and so having that is a level of service that you know, some institutions choose to charge for.
So it could be a revenue generating potential as well.
So you know, consider that when you’re considering a solution. Hey, I want, you know, my financial institution to have as many businesses as we can.
To offer them a solution, but we also want to make sure that they’re going to opt into the solution.
As we you know, make an investment in it.
And then look for a solution that’s going to allow you to analyze patterns, identify potential vulnerabilities right when you’re doing those business reviews with your business. You know, hey, how are things going with our relationship, giving them the ability to, you know, look through the exceptions that have?
Been thrown look through.
The you know potential fraud attempts that a solution has forwarded and those reports are going to be critical when you’re sharing that information back and forth to say, you know, we’re we’re on the lookout for.
Your funds were, you know, we’re doing what we can to protect the information that you have with us and the transactions that you’re facilitating across our network.
And so the solution that you look for has to have that reporting that’s going to allow you and your business to collaborate. You know, the whole, the whole topic today was around uniting businesses and financial institutions, right?
So that reporting is going to bridge that gap to say here’s what we’re seeing on your payments and here’s how we are addressing.
Those those potential attempts as well.

Amy Morris   42:07
And that last bullet just really goes like hand in hand with with the new notch of rules.
That’s really what they’re all about. You know, analyzing transaction patterns and identifying those potential vulnerabilities so.
Amen. And you know, big hands up on that.

Brynn Johnson   42:29
Sorry, I was on mute there.
So we have some.
So thank you all for that.
You know the discussion in the chat is so rich and that’s what we really like to see, you know, and also I wanted to say, you know, as the marketer here, the beauty of positive pay is that.
There are you can package it the way that you feel is going to work for you as a financial institution and you know your your account holder audience.
So if you feel that you want to add it as just a way to attract.
New account holders. You can add it as like a a premium offering or sort of a next Gen. offering, but there is.
I can grab the stat, but there is a stat that a significant number. There have been studies that, you know, account holders are willing to pay for this service.
So there’s really a variety of ways. If if you’re really strategic with your fi and your your Treasury team to talk about how you can use positive pay, not only for fraud prevention, but for a business business driver, just wanted to pop in there, you got to have.
The voice of the marketer sometimes.

Jordan Bothwell   43:34
Bryn, do we have questions that the audience has brought to us?

Brynn Johnson   43:38
Yeah. So, so as Amy was speaking, we had a lot of really Nacha’s specific questions.
And Amy, I don’t know if you can see in the chat or if you want me to read them to you.
Sometimes they get a little technical and I don’t want to butcher any of the nuances.

Amy Morris   43:50
Yeah, I did.
I did take a scroll through the the chat.
I don’t know that I’ve seen all the newer messages, but I did see that there were a few different folks asking about name matching.
And I think that so at this point, if you’re not aware as has always been the case, the notch operating rules require posting off of account number only.
So if an account number matches, then the transaction is is able to post.
To that account.
And we’ve talked about name matching, meaning that to include that the name on the transaction also needs to match the name on the account, or that there would be a legitimate return reason for that and we’re just not at that point yet.
For a couple of reasons.
One, there are legitimate times when somebody that may not be listed on the account is having a transaction sent to an account.
But also we are just not as an industry.
Our technology is is not quite there yet.
Now it’ll be interesting to see what’s going to happen with AI or potentially quantum.
To see how things could speed up. But at this point there just is not the technology available to look at all of the different variations of names, and particularly you know we’ve got Tom Thomas, Tommy, issues like that. But then we also have folks.
You know, with multiple last names, middle names, lots of different name, type of variation.
And and it’s just not the technology is just not there yet, but it is something, you know that we will all be watching, you know, very closely over the next several years.
We had a question in here about.
Basically what we call RDF is so looking at financial institutions that open fraudulent accounts.
And and what could be some of the results of that in terms of processing through the network etcetera?
Well, I would say that not just NACHA, but other regulators do come in and they do provide, you know, their services.
And and then those audits and risk assessments and and findings from regulators are reported back to ACH operators and in fact the Fed may come in and do their own auditing. And so there’s.
The potential.
Of restriction of services through that Ave. NACHA is able, through our rule enforcement process, if there was an egregious situation, we would be able to take action against an FI. And that means. But really, our new rules that will be coming in in 26 are really the.
First step.
In saying that you know again Rdfi receiving depository financial institution.
You have skin in the game, so prior to this rule change, receiving institutions were passive really in the network.
All of the warranties and all the liabilities are held on the sending side and that hasn’t changed as a result of these new rules.
But what has changed is again the 1st.
You know the first step, the first time that we’ve said, OK, RDF is you have to do something now because.
Little bit different than what we’ve been talking about in this conversation.
So when it comes to credit fraud, the only way that credit fraud is successful is if there is an account for it to land in and then be spent from.
And so this really is the first step of not just saying, OK, financial institutions, you are responsible both on the sending and the receiving side to to monitor the activity of of your account holders.
And then there was one about are we looking at expanding?
The the limited window of.
Non consumer transactions so right now.
All the various types of of returns for non consumer transactions fall under our standard return time frame, which is means it has to be back to the descending fi by the morning of the second banking day following the settlement date.
I would say to watch early next year for a request for comment from NACHA on risk management phase two and in there, there will be a piece talking about expanding or creating a new return reason code similar to the R17 questionable code that we have today that.
Also falls under the standard return time frame.
And creating in a new code that would have a longer.
Return time.
Attached with it so that would be the opportunity there to really, you know, let us know your thoughts on what if should it align with the 60 days of unauthorized?
Should it be something in between?
Should it be include corporate transactions? Etcetera.
That’s really, you know what we’ll be looking for today.
Or in that RFC next year. And then we’ve got. I’ll, I’ll take. I’ll see one more question then I’ll, I’ll turn it over here around.
Should an originator be using an ACH company ID for more than one entity? If they’re not related?
Technically no.
Now company ID’s might not necessarily be unique across financial institutions.
You might have somehow.
There might be a duplicate worth 1 odfi and another O DFI.
By and then sometimes you might have, for example a third party sender which is a party. That’s a vendor that that sits in between the odfi and the actual originator, and it’s the third party sender that’s actually the customer with the financial institution.
And sometimes they haven’t been educated as well, and perhaps everything from that third party sender might come in with the same company ID, but.
In those instances, it would be good contact the OD fi.
It contacts the odfi when we hear about this and gives them some education on how the third party sender should have multiple company IDs to use for their various originators.
So I think I got a bunch of the notcha specific questions there.
Let me go ahead and turn it back over to you guys.

Brynn Johnson   50:44
Awesome.

Jordan Bothwell   50:44
It was super helpful information. I think everyone was reacting really positively in the chat.
Brian, I saw you posted the Essentials guide, so I would encourage everyone to to look at that post and and download that information.
It’s all about how we can encourage our.
Our our businesses to, if we do have a positive pay solution to actually use it and and why they should use it and you know how how we can you know empower our institutions.
Through through measures that we take at our financial institution, right.
So ways that you can communicate this out better to them, ways that you can let you know, help, help them see the light on why this is an important task and and how it benefits them.
To to implement this positive pay solution and and to use it and to you know, go to that higher level of of account or whatever it may be, of how you’re offering that solution along those same lines, I think it’s important. I saw a couple of questions in.
The chat about.
Or at least comments about. You know we have positive pay, but some of our our account holders get frustrated because of false positives.
So when you’re thinking about choosing a positive pay solution, if you haven’t gone there, or if you’re looking at at changing your positive pay solution, consider that as well. Making sure that the solution addresses false positives and so if that is through, you know a payee match.
Verification right? If the payee matches where the the false positives are coming through.
Making sure that that solution allows you to tailor the sensitivity or the.
The the factors that are being looked at when it’s providing an exception on that payee, match information and and you know, making sure that that solution allows you to say, hey, it’s not just if it throws an exception.
It’s going to always throw an exception, but making sure that that business has the power to say, hey, this is not a relevant alert, don’t show this to me again, process this payment, right? Put it on a.
You know allow list or a block list essentially based on on that parameter.
So I think it’s another important factor to consider is making sure that it, like we talked about earlier, doesn’t impede the good transactions from going through, right?

Amy Morris   53:09
I see one other ACH role question that popped in here and since I mentioned the R17, we got a question in here asking for an example of the we had a rule change around R17 that just went into effect at the the top of this month.
And really, what that rule change was that went in was.
Actually taking away some of the language around the description of the use of the code to really let it be at the receiving financial institution’s discretion, discretion to utilize.
Any excuse me? Anytime they want to convey a message of potentially questionable transaction.
Some examples of that.
There’s the credit side where, for example, you might have, let’s say, unemployment insurance fraud.
That was a big thing.
You’ve got an account that has, you know, 5 credits. That doesn’t look right. We want to return those with, you know, an appropriate flag to to get somebody to look at them so that we prevent it from happening in the future.
So that’s one example. On the debit side, you still have the option because again, there’s no.
There’s right now, no.
Extended time frame around R17, so if something is in an authorized debit you would wanna return it as unauthorized.
But there is also the option of the R17 questionable and so one of the original use cases for this was let’s say that you actually have debits that come in that don’t post because perhaps you gotten five of these from the same originator, they all came in.
And instead of having an account number.
They have.
You know a Fed routing number or a a Social Security number on them. And these are things you know that are wrong and you don’t want to just return them as an invalid account number.
You again want to convey that message of hey, something is going on here. You need to look at these and lock down your system.
So that’s another example of of where you would use R17 for turns.
So if I missed any, you know Bryn, please holler.
Otherwise, I’ll I’ll turn it back over to you.

Brynn Johnson   55:29
Yeah. And I and you know if we we can always follow up if if we’ve missed anything. But we just wanna say thank you again for the rich conversation and just.
That guide is the the link to it is in the chat, but we will also send it as a follow up.
It’s a like completely brand new asset that we just created based on everything we’ve been hearing, everything we know to be true about what’s essential in next Gen. positive pay so.
You’re gonna. It really is an essentials guide, but really it’s an empowerment guide as well of not only what is positive pay, because we’re all very, I think we’re all very clear on that.
But but how do you really?
How do you really use it in your in your FI strategy and?
Yeah. So we definitely want you to check that out.
So. So look in the chat for the link to that and then also look in your inbox for a follow up. And as we mentioned, you’ll also get the follow up to you’ll get the recording of this as well as access to the slides.
If you should want those.
So we’re just really, really thrilled about this conversation and, you know, fraud isn’t going away, but these tools, you know, we’re we’re just continuing to advance along the way and we’re so happy to have partners like NACHA on our side with us.
Anything else you want? You wanted to cover?
I know that was just a fantastic we. We got to really talk about the the how, what, when and why of this. Of this positive payroll so.

Jordan Bothwell   57:05
I would just say that the the chat was really rich.
So I think you know a lot of good conversation between and amongst the financial institutions.
So I think it’s really one of the things that I like most about working in this industry is everyone kind of shares ideas back and forth.
So I am I think, keep that conversation going, you know, between amongst yourselves and then, you know, feel free to reach out to, to myself. For Brynn or Amy.
For any any additional information you might need so appreciate it.

Amy Morris   57:34
Yeah. Thank you all.
It’s really great to be here to not just talk about rules, but actually talk about tools to help you, you know, thwart fraud and and just stay in compliance.
So really appreciate you guys having me. Thank you.

Brynn Johnson   57:50
Thanks everyone.
Have a great rest of your day.

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