Proper Authorization: WEB Transactions

by Jackie Hollenkamp Bentley

The plastic poinsettias are already on shelves. Ornaments are now hanging in droves along the aisles. Red and green decorations have begun to flow across the store rows. Yep. Holiday shopping is already beckoning consumers to start buying.

For those merchants who rely on the Internet to sell their wares and services, it appears Santa Claus will be kind to e-commerce.

The National Retail Federation is predicting online sales to “increase between 7 and 10 percent over last year to as much as $117 billion.”

The predictions are even better from eMarketer. It’s forecasting online sales in the US to jump 17.2 percent this November and December.

With that in mind, it’s a good idea for merchants to revisit the National Automated Clearing House Association’s rules for authorization of WEB Entries (Internet Initiated/Mobile Entries) before the Christmas craziness kicks in.

In this latest post on iCheckGateway.com‘s series on proper ACH authorization methods, we’ll detail the best way to obtain a customer’s authorization to debit his or her bank account for goods or services rendered.

Whether it’s a one-time transaction or a recurring arrangement, all authorizations must have clear and understandable language that a customer can easily see on a computer screen or other visual display such as phones, tablets, notebooks, etc.

The way a merchant presents that online authorization language is flexible, as long as it contains the following:

  • ✓ the transaction amount
  • ✓ the effective date
  • ✓ the routing and account numbers of the customer’s financial institution
  • ✓ a method for the customer to revoke the authorization

Here is iCheckGateway.com’s recommended sample for a one-time online transaction:

I authorize Merchant Name to debit the bank account indicated in this web form, for the noted amount on today’s date. I understand that because this is an electronic transaction, these funds may be withdrawn from my account as soon as the above noted transaction date. I will not dispute Merchant Name debiting my checking/savings account, so long as the transaction corresponds to the terms indicated in this web form.

[Click to Authorize Payment]

If it’s a recurring transaction, wording can be the following:

I authorize Merchant Name to debit the bank account indicated in this web form, for the noted amount starting on today’s date and for the schedule selected by me. I understand that because this is an electronic transaction, these funds may be withdrawn from my account as soon as the above noted transaction date. I will not dispute Merchant Name debiting my checking/savings account, so long as the transaction corresponds to the terms indicated in this web form.

[Click to Authorize Recurring Payment]

In addition, iCheckGateway.com recommends that the payment authorization language appear on the same page as the bank account information to make it clear to the consumer exactly which account he or she is authorizing to be debited.

Merchants are required to keep all authorization agreements for two years in case a customer’s bank requests proof of authorization for a transaction.

Proof of authorization can include the authorization verbiage, documentation that provides transaction details (including customer info), as well as sales documentation to show what goods or services were exchanged. The merchant can also provide a date and timestamp of the customer login, IP address, and authorization process to help evidence the customer’s identity and their agreement to the authorization.

This authorization process, combined with a clickable button prefaced with a statement that the customer agrees to the withdrawal once “clicked”, will satisfy NACHA’s regulations and keep a merchant’s operations running as smooth as eggnog on a Christmas morning.

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