Digitizing Payments with ACH Account Validation

Automatic Clearing House (ACH) is a computerized payment processing network that uses bank routing numbers to transfer funds between bank accounts securely. As digitization and real-time payment methods reshape global commerce, ACH merchant services providers can help businesses improve efficiencies and mitigate losses due to errors and fraud. In addition to being faster and more secure than paper check processing, ACH digital payment solutions use advanced technologies to authenticate transactions before payments are sent.


The Evolution of ACH Payments and Account Validation

The shift from paper to digital processes, accelerated by a global pandemic, has forced businesses to adapt to digital commerce forms. ACH digital payment solutions, processed through the ACH network, are gaining popularity by providing business owners and consumers with simple, secure, and convenient ways to transact.

For 50 years, the ACH network, operated by the National Automated Clearing House Association (Nacha), continues to drive successful growth and payment modernization. The ACH network thrives as it evolves in response to changing business requirements. Nacha’s ongoing efforts to craft regulations that foster innovation have increased annual processing volumes by 1 billion in the last five years.


Innovative ACH Payment Technology

As industries shift from paper methods to digital processes, ACH digital payment solutions can improve security, accuracy, efficiency, and profits, giving businesses a competitive advantage in a digital economy. ACH payments are more secure than paper checks and have a lower interchange rate than credit card transactions. ACH payment validation leverages advanced technologies to protect against check fraud, data breaches, and identity theft.

Paper becomes impractical in the increasingly digital payments landscape. U.S. banks aggressively work to replace manual paper-based systems with agile, secure, and efficient processing solutions to meet clients’ demands for digital payment services. The economic aftermath of Covid-19 has reinforced this trend due to restricted access to banks and businesses and rising remote worker populations. According to a recent survey by Isometrics and Global Workplace Analytics, 82 percent of the U.S. workforce, representing about 75 million employees, will continue to work from home even after the pandemic. While financial institutions, professional offices, and other businesses allow their employees to work from home, the entire population continues bill payments for order products and services— whether online or on contactless devices— and coordinates purchases as a part of day-to-day living. Whether in convenience or necessity, merchants that have the solutions to process funds in the mobile and digital landscape provide better tools to serve their customers’ preferences and needs.


Ease the Transformation into a Digital Payments

Banks stand at the forefront of the digital revolution transforming payments, both as technology leaders who have successfully updated legacy infrastructures and as trusted resources that help communities and business owners implement mobile and digital solutions.

As technology leaders, banks digitize legacy payments industry rails to support the rising use of virtual cards, contactless commerce, and other payment systems. The role of banks as an educational resource is paramount to many businesses. Most clients have built their processes around legacy systems; banks ease the transformation by helping clients navigate each growth phase of their digital journey. Banks cater to each client’s unique requirements while balancing new technologies with traditional payment channels and workflows. Banks also help clients leverage new capabilities that drive speed and convenience without sacrificing security. These provisions assist in seamless transitions to support the success of their clients.


ACH Digital Solutions for an Evolving Economy

Virtual cards and contactless payments, among other emerging technologies, will replace cumbersome manual processes in the new digital economy. As demand grows for speed, flexibility, and convenience in payments, the ACH network leverages these innovations to transition to more efficient automated processing successfully.

The U.S. Real-Time Payments Network (RTP), launched in 2017 by The Clearing House, enhances speed, efficiency, convenience, and transparency. RTP delivers transactions from initiation to reconciliation in seconds. RTP’s implementation normalizes the 24/7/365 business economy, eliminating cut-off times and restricted business hours, giving businesses increased revenue opportunities.

In March 2020, the network raised the Same Day ACH (SDA) dollar limit from $25,000 to $100,000 to accommodate convenient, frequent daily settlements.

FedNow, a near-term real-time payment system created by the Federal Reserve, will also facilitate instant transactions around the clock to improve funding access. According to the Fed, the program, expected to launch in 2023 or 2024, will reduce consumer overdraft and late fees and alleviate cash flow problems for small business owners.


ACH Account Validation: Merchant Account Fraud Prevention

Although new technology brings many benefits, the industry faces challenges in protecting its customers from illegal activities. Increased reliance on technology can expose banks and businesses to the fraudulent transaction possibilities of money laundering, account takeovers, and real-time fraud. For example, The FBI reported an escalation of Card-Not-Present fraud during Covid-19, as many civilians transacted on virtual channels for the first time. As criminals launch increasingly complex attacks, fraud and risk prevention are top-of-mind for business owners who look to protect ACH, wire transfers, and RTP channels from unauthorized access.

In the current climate, multilayered security and real-time pre-validation services can help banks and companies mitigate the risks of illegal and unauthorized access to their merchants. Nacha creates new rules to continually strengthen the ACH providers in their network with heightened security policies. ACH security rules for merchants mandate that “commercially reasonable” encryption technology must be utilized when processing customer banking information in WEB technology to verify, at minimum, the validation of the account at the time of the processing of the transaction. Upfront validation tools authenticate transactions before they are sent, using APIs and smart routing logic to confirm account status and ownership. This reduces the number of ACH returns that burden the merchant with unnecessary costs of their fees and time to recover those otherwise lost funds.

Merchants will be more likely to adopt electronic payments knowing they have the tools for increased security and fraud prevention to protect their business. Electronic methods will prove more secure with these security tools than paper-based transactions.


Digital Payment Solutions: Your Payments Toolkit

In the fast-moving payments ecosystem, businesses need various tools in their arsenal to meet clients’ immediate and long-term needs.

Today’s emerging payment technologies provide flexibility, convenience, and choice. Blending effective and efficient traditional capabilities, such as eCheck processing, ACH processing, and cash management, with cutting-edge real-time solutions, merchants enable their customers to transact anywhere, on any device, and in their preferred currencies and payment methods.

Simple, secure, and user-friendly services are replacing antiquated paper check management in the evolving U.S. landscape. These innovative overlay services enhance the client experience, providing security features such as tokenization and PII data encryption services to initiate and receive electronic payments while protecting user privacy.


Mobilizing Digital Payments

As digitization and technology reshape the U.S. payments landscape, banks, service providers, and business owners must work together to support every stage of the digital journey to meet present and future requirements. Trusted technology partners help banks and business owners deliver fast, secure, and convenient solutions to stay ahead of competitors.

A reliable technology partner will ideally provide a single comprehensive platform for accepting all types of payments with technical support to ensure seamless integrations. As businesses grow and scale their companies and customer portfolios, they profit with a suite of options in one platform, enabling enterprises to balance legacy systems with innovation as they plan for long-term digital growth.



iCheckGateway.com works with various businesses and industries to build a safe, robust, and profitable digital future. We leverage advanced ACH and credit card processing technologies with our partners to create new fee-based revenue streams, customized solutions, and cross-selling opportunities. Our platform, best-in-class technology, and expertise help businesses and financial institutions attract, retain, and protect commercial customers and merchant accounts. Contact iCheckGateway.com for more information about the latest in ACH processing technology.


Date Originally Published: October 12, 2020

Date Updated: August 1, 2022

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