Setting up an ACH payment form remains the first step toward processing ACH transactions with ease. The ACH network offers slightly more security than the other money transfer modes. The network helps minimize fraud and process payments more seamlessly by collecting an additional layer of information. Studies show that the ACH payments have the lowest rate of fraud because of this additional security. Nacha currently offers three ways for you to authorize the ACH payment forms. In this blog, we discover how these three methods differ from each other.
Paper-Based Authorization with ACH Payment Form
Paper-based ACH authorization forms stand as the most common way for you to authorize ACH transfers. Transactions processed with paper-based authorization are popularly known as PPD transfers. These forms over paper serve as a critical piece of evidence for the sender, receiver, and the payment processor, to settle any financial disputes in the transaction. The key components of a paper-based authorization form include:
- Sender’s name and contact information
- Receiver’s name and contact information
- Necessary payment details (Payment details include the frequency of payment and the collection date. You use the ACH network to automate recurring payments over a pre-set schedule. This is one of the key reasons why companies often prefer using ACH over other modes of online payment.)
- Authorization statement
- Sender’s bank account details
- Recourse statement
- Date of agreement and the corresponding signatures
You cannot create a sample form out of the blue for legal purposes. For an authorization form to be legally valid, you must follow the template set by Nacha. Although these forms do not have a standard format, they possess crucial elements that you cannot miss. You can download a sample authorization form directly from Nacha’s website. This sample form contains all the essential components mentioned above. Learn more about these components of the ACH authorization form.
You can also authorize an ACH transaction over the phone. Transactions processed with phone-based authorization are popularly known as TEL transfers. Fortunately, phone-based authorization is generally much faster than paper-based forms. However, you cannot authorize all your ACH transactions over the phone. For Nacha to consider phone-based authorization valid, the transaction needs to meet the following conditions:
- An existing relationship between the customer and the vendor exists.
- The customer needs to initiate the phone call.
You can define an existing relationship between the parties with the availability of a legal written agreement. This document should clearly contain the details of the relationship that show that the customer has purchased goods/services from the vendor at least once in the last two years. Carefully, Nacha planned the second condition to ensure that the vendor cannot commit fraud by gathering authorization over a cold call.
Ideally, processors recommend phone authorizations only when the vendor and customer completely trust each other to deliver the goods/funds. Hence, phone authorization remains an invalid way for the parties to authorize the first transaction.
Online/web authorizations are commonly used by vendors/customers who are conducting business remotely. Transactions processed with web-based authorization are popularly known as WEB transfers. These forms are as safe as paper-based authorization forms. Like the paper-based forms, these forms do not have a standard format. However, they also must have critical details similar to those on the paper-based document.
Businesses dealing with online authorization forms must offer an additional level of security in the form of an annual audit. Such an audit is used to confirm the availability of:
- Physical security: To protect the system against physical tampering, damage, and theft
- Network security: To ensure safe capture, storage, and distribution of critical data
- Personnel access controls: To protect the system against unauthorized usage and access
Payment processors often recommend both the vendor and the customer keep copies of the ACH payment form handy at all times. Undeniably, these forms can help them settle financial disputes if needed. Relying on Nacha-certified top payment processors can help you set up secure authorization methods for your ACH and credit card transactions. Get in touch with our relationship managers to know more about the world of payment processing here.
Date originally published: January 27, 2022
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