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Reducing Fraud with Account Verification

August 18, 2021|0 min read
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The pandemic has driven the need for online payment methods, the need to reduce fraud, and at the same time, to increase the volume of secure ACH transactions. According to the National Automated Clearing House Association (NACHA), which enables ACH payments, organizations are required to have account verification as part of their fraudulent transactions detection systems.

There were 7 billion payments made on the ACH Network during the fourth quarter of 2020, reflecting an 8.9% increase over the same period in 2019.


Meeting 2021 NACHA Account Validation Requirements with MX’s Modern Connectivity Solutions

What You Need to Know

With ACH transfers growing exponentially, so does the risk of fraudulent activity. In an attempt to reduce fraudulent transactions, NACHA announced new requirements for fraud detection standards for WEB debit account validation that went into effect on March 19, 2021. As part of the commercially reasonable fraudulent transaction detection system, NACHA will require that originators establish account validation and routing number verification methods.

Simply put, the new rules require originators to validate consumers’ account information before a debit transaction occurs. NACHA will not enforce the rule until March 19, 2022, for “covered entities that are working in good faith toward compliance, but that require additional time to implement solutions.”

NACHA Compliant Solutions Powered by MX

Any business that accepts ACH payments is required to comply with the new NACHA requirements. MX has developed solutions to help you remain compliant and gain value and actionable insights from your data.

Modern Connectivity

MX’s Modern Connectivity solutions provide access to data required for enhanced fraud detection for ACH transactions, per the 2021 NACHA ruling. Our advanced solutions route users to multiple connection methods accepted under the new rule.

Modern Connectivity Includes:

  • Tokenized, credential-free connections
  • Instant access to account and routing numbers to link accounts for ACH payments
  • Ability to retrieve balance, identity, transaction, account statements, and rewards data, as well as
    microdeposit-based connections
  • Data enhancement through the industry-leading MX Data Engine

MX approaches aggregation differently by extracting more metadata from the transactional data. With this data, MX enhances customers' financial data through categorization and classification to reveal details such as merchant logos and location. This data can be used to supplement and de-risk the payment process with solutions such as machine-learning-based anti-fraud tools, balance projections, and more.

MX Instant Account Verification

MX microdeposits, or micro-transaction verification, are also NACHA compliant. MX offers this type of connection through a partnership with Dwolla. The MX microdeposit verification removes the need for clients to manage their own ACH and microdeposit processes. This approach provides expanded
coverage to financial institutions of all sizes, giving all customers secure access to their financial data —no matter where they bank.

Looking Forward

The new rules for ACH deposit entries are NACHA’s attempt to combat and reduce fraudulent online activity. To stay “commercially reasonable” and comply with these new standards, you need a solution that can help you verify account information safely, reliably, and securely.

MX offers various solutions that can authenticate accounts quickly with the highest level of accuracy and security on the market, so you can have reliable coverage and connectivity to process transactions quickly and confidently.

MX is leading the industry with connectivity to instantly verify more than 90 percent of depository accounts within seconds. MX offers coverage to the remaining 10 percent of U.S. depository accounts via microdeposits. With modern connectivity powering these two solutions, your organization can remain NACHA compliant, reduce risk, and gain better insight from the data your customers are sharing and connecting to.

If you want to read more on this topic, here are 3 ways to stay competitive in the payment space as consumers increasingly shift to digital solutions.

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