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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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November 9, 2020

Cheering on the Team—Go ACH!

Did you see the commercial during the last SuperBowl about ACH payment innovations? No? Me neither. Of course, that's because there wasn't one. In fact, it doesn't appear there needs to be public advertisements for ACH payments. Why? With value processed on the network having increased more than $1 trillion over the past seven years Adobe PDF file formatOff-site link, ACH doesn't have to be a household name. What you do need to know is that there is lots of growth and innovation happening with ACH behind the scenes these days, and I am an ACH cheerleader.

According to Nacha, the organization responsible for administering the ACH network and its private-sector Operating Rules, the Automated Clearing House (ACH) network processed 34.7 billion transactions valued at $55.8 trillion in 2019. That's, respectively, 7.7 and 8.9 percent growth over 2018. That's also 47 times more than the combined 2019 net sales of Walmart, Amazon, Kroger, Costco, and Walgreens, which was $1.186 trillion, according to National Retail Federation rankingsOff-site link. As for the number of transactions, the total volume of U.S. ACH payments in 2019 translates to approximately 75 payments per person. Any way you count it, it's hard to deny that, as with a line of scrimmage, there's action around ACH.

Innovation, too, has been burgeoning. The Federal Reserve System's Retail Payments Office, which is located at the Atlanta Fed, is one of two ACH network operators, so we have a front row seat. We're seeing lots of fintech creation, including, for instance, mobile apps and voice-activated or conversational paymentsOff-site link. Much of this innovation takes place through a democratic rule-making process, whereby stakeholder work groups study recommend opportunities for modernization. These groups have been extremely busy.

October 30 was the deadline for all depository financial institutions participating in the ACH Network to register their primary representative in the ACH Contact Registry. Nacha will maintain this database on behalf of registry members, making it easier for them to contact one another. For them to have fast access to live humans managing ACH operations can be critical, especially when mitigating time-sensitive fraud events such as business email compromise.

In the never-ending fight against fraud, three changesOff-site link will take effect in 2021. First, Supplemental Fraud Detection for WEB Debits (WEB debits are also known as internet-initiated entries). With this change, ACH originators will be required to include account validation within a commercially reasonable fraudulent-transaction detection system for the first use of new account information. This validation will help block ineligible receivers. Second, security requirements for stored data will be enhanced. Third, a new return-reason code will be created for unauthorized returns, allowing financial institutions to immediately differentiate unintended mistakes from suspected fraud.

Next spring, another highly anticipated ACH change will occur. A new Same Day ACHOff-site link processing window deadline of 4:45 p.m. goes live on March 19, 2021, which will expand access to same-day processing, especially beneficial to financial institutions in the Central, Mountain, and Pacific Time zones.

ACH was the very first payments system I studied, and I've been an ACH cheerleader ever since. I'm very excited for all the changes that are in play. And while my family and friends—well, most people for that matter—don't exactly celebrate the innovation wins with me, my payments teammates know how much work goes on around the ACH network to continue to make forward progress.

Go, ACH!