Consumers, governments, and all types of businesses are increasingly relying on ACH payments for money transfers, bill payments, and direct deposits, which have led to solid year-on-year growth. For the 10th consecutive year, ACH payments increased by about $1 trillion.
With this exponential growth, the governing body, National Automated Clearing House Association (Nacha), has established frameworks and rules that ensure the ACH network is safe. Every year, Nacha updates a well-defined ACH risk management framework and establishes regulations to enhance fraud prevention and boost overall customer experience.
This blog post will examine some of these security standards established by Nacha for electronic payment processing and why they are important for the consumer to understand.
Like other digital transaction methods, ACH is also at risk of fraud. However, Nacha has established multiple security standards to fortify ACH security. Here are some of the standards you need to know:
Nacha established this rule for all merchants, businesses, billers, and governments that send two million or more ACH payments. According to Nacha, large senders are required to protect account numbers by ensuring they are unreadable when stored electronically.
In 2022, Nacha introduced a new risk management framework for banks. The framework was introduced to deal with fraud related to credits and credit returns. In addition, it will reduce fraud when it comes to payroll impersonations, account takeovers, business email compromise, and fraudulent claims for benefits.
To enhance payment security, Nacha extended the rules for WEB debits in 2021. Before this new rule, merchants who accept ACH payments were expected to have a commercially reasonable method to validate routing numbers and customer identity. However, with the new security standards, Nacha also requires account validation.
Whether you are using the ACH network for bill payments or money transfers, you can enjoy the benefits of the Nacha security standards. Let’s look at why they are important.
These security standards come in handy if you are looking to adopt enterprise risk management practices for your ACH network. Sensitive information is vulnerable primarily when in transit. However, the ACH rules ensure that sensitive banking information is encrypted. These standards provide an additional layer of protection to prevent the misuse of sensitive information.
Nacha is highly focused on providing a secure ACH network. If you are a merchant, Nacha recommends fraud detection tools in WEB. In addition, they also have different types of ACH authorization forms and strict validation procedures that secure your payment processing systems.
If you use ACH technology, then you must comply with Nacha standards. The security rules align with the existing PCI DSS standards, ensuring that sensitive customer information is safeguarded in all transactions.
Data breaches can cost your business millions of dollars. Statistics show that in the first half of 2022, there were about 236.1 million ransomware attacks worldwide. Some common threats to payment processors are malware attacks, data breaches, and phishing scams that can expose sensitive banking information.
However, Nacha security standards can help mitigate these fraud risks by establishing new frameworks to protect all types of businesses. Additionally, every year, Nacha introduces new regulations and operating rules to ensure all users are compliant.
If you accept ACH payments, here are the best practices you need in order to comply with Nacha security standards:
To protect your organization and customer information, you must first assess any risk in your payment processes. Evaluate the existing technologies to identify areas that have potential loopholes for cybersecurity attacks. With this information, you can improve your security and adopt Nacha regulations.
Once you've identified the potential risks, you must plan to improve your security protocols. You can adopt technologies such as data tokenization or use iFrame payment processing to achieve the highest levels of compliance and security.
To prevent fraud within your payment network, you should constantly monitor the activity. This is important because it allows you to spot any potential security breaches. You can spot any fraudulent activities like identity fraud to help you protect sensitive customer information.
Companies comply with Nacha to boost the security of their transactions. Here are some real-world examples of companies that have successfully complied with Nacha:
To effectively manage your payment processing systems, you should rely on Nacha-preferred partners only, like iCG. These partners will enhance the security of your ACH payments and protect your sensitive customer information from fraudulent activities. To get started, schedule a call with us today!