Is ACH Part of Your Payment Mix?

by Marci Gagnon, Qualpay

If so, you should know that the rules are changing on March 19, 2022. Here is what energy marketers need to do to be prepared.

ACH (Automated Clearing House) payments, also known as echeck or bank payments, are electronic transfers between two bank accounts that offer energy marketers many advantages including reduced transaction costs. If your company is handling physical checks, taking recurring payments, or processing high-ticket dollar transactions, you are probably already using ACH as a payment option for your customers. If not, perhaps now is the time to think about adding it.

Historically ACH has been a very cost-effective way to send or receive money. However, the new ACH rules introduce fees you should be aware of and understand in terms of expense. Check with your ACH software vendor for any new fees.

New Regulations

Originating in the 1970s, the ACH network is governed and operated by the National Automated Clearing House Association (NACHA), a private organization funded by financial institutions. NACHA requires ACH originators of web payments to use a “commercially reasonable fraudulent transaction detection system” to screen for fraud. Starting March 19, 2022, NACHA will expand their guidelines to require that when a new routing and bank account number is collected, the information is verified before processing a payment.

All businesses accepting ACH payments online, or entering them into a system to transmit via the internet, will need to validate the routing and banking account number through a NACHA approved third-party service. Consequently, submitting flat files via your bank portal for those ACH payment types will no longer be compliant, leaving software vendors and energy marketers scrambling to find compliant, cost-effective solutions.

Benefits of Account Validation

A benefit of the new regulation is that key payment account details will be verified when initially collecting the information and before processing an ACH payment. This means that returns received for “no such account” or “account closed” will be reduced, saving you the time and money required to chase down a customer for new payment information.

The new NACHA rule aims to alleviate fraud, which will help energy marketers maintain revenue already collected, removing the possibility of a customer miskeying the bank routing or account number. Since there is no concept of an authorization for ACH, miskeying is the main reason a transaction may be returned. A return triggers cash to be immediately debited from your business’s bank account, impacting cash flows and revenues collected. Once in place, the new rules will reduce the amount of customer interaction needed for energy marketers to verify banking information.

What Energy Marketers Need to Do

First and foremost, any software vendors that help facilitate payments should be aware of the new ACH rule and what, if any, impact it will have on their customers. The good news is that most software providers have implemented changes to accommodate the new guidelines. However, if you or your software vendor is unaware of the new rules, take a moment to review the new guidelines at tinyurl.com/hh9wbuzb.

The next step is to ensure that you are receiving fair rates through your payment processor. If you need to change from a flat file to a software solution for ACH, check the pricing before you sign up for their service. Also, look for a vendor that is creating intelligence around verification and not triggering unnecessary expenses for you. This intelligence will include awareness of when a return has been received for the same routing and bank account number when a validation request is made. Instead of routing the validation request for an additional charge, the vendor should adopt the response from the information on file.

Marci Gagnon is Vice President of Strategic Alliances at Qualpay, Inc., a fully integrated payments company offering customized service and technology for fuel marketers. She can be reached at marci@qualpay.com or 207-650-9985.

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