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September 08, 2022

5 ways staying up to date with Nacha’s Operating Rules benefits your organization

Houri Simon

The Automated Clearing House (ACH) networkis a critical piece of almost every American's life. It is responsible for delivering direct deposits of payroll, social security benefits, tax refunds, and more. However, for the ACH network to function properly, it needs a governing body to ensure efficient payments, better risk management practices, and the reduction of potential returns. That governing body is where Nacha comes in.

Nacha’s rules ensure that the ACH network remains an accessible and trusted part of America’s financial infrastructure. When you comply with Nacha’s rules and standards, you’re not only ensuring a safe and effective ACH network for all who participate in the ACH ecosystem, you are helping your organization run more smoothly and efficiently.

Staying up to date with Nacha helps your organization: 

1. Create a better processing experience

This rule allows for easier identification of individual micro-entries and it enables Receiving Depository Financial Institutions (RDFIs) to apply desirable processing routines. The rule also results in more effectiveness in the use of the Micro-Entry process for account validation, and better customer experience due to standardization of the description and processing of entries. These rules improve the ACH Network as a whole by increasing the clarity of the micro-entry process. Ultimately, this results in a streamlined process and a better customer experience.

2. Reduce fraud

As technology continues to advance, so do fraudsters. Following Nacha standards helps protect customers against new fraud scams. Over the years, Nacha has released rules to help prevent different fraud scams and protect consumers.

For example, Originators of Micro-Entries will be required to use commercially reasonable fraud detection. These requirements can help reduce the potential of fraudulent schemes that utilize Micro-Entries because monitoring forward and return volumes establishes a baseline of normal activity. When appropriate due diligence is used to minimize system abuse, everyone benefits. 

3. Promote data security

Nacha helps ensure that consumer or other sensitive data involved in ACH processing is safeguarded to prevent theft, internal misuse, and/or accidental disclosure. Nacha recently updated its ACH Security Framework to require large senders of ACH payments to protect account numbers by rendering them unreadable when stored electronically. This adds another layer of information security for data used in ACH entries. 

4. Improve usability

Staying up to date on Nacha’s standards helps improve consumer safety and trust. That’s because consumers expect a secure and smooth money movement process and are more likely to continue using a service that works properly. 

The inverse is also true. Failing to comply with Nacha standards could result in a customer experiencing failure with their payments—which could have real-life consequences for customers trying to pay rent or other bills, or sending money to family members in need. A bad ACH experience can cause once loyal customers to turn to new providers to meet their needs.

5. Avoid penalties (which can be severe)

Violations of Nacha’s rules must be addressed immediately and could result in significant fines. The Nacha Rules include a system of rules enforcement with associated fines and penalties, ranging from one-time assessments to penalties of up to $500,000 a month for the most severe offenses. 

Plaid can help you transmit ACH entries easily and securely. 

At Plaid, we believe consumers and senders of ACH entries deserve a safe and secure ACH experience. Plaid is a Nacha Preferred Partner and has been recognized by Nacha for leadership and innovation in advancing and promoting the safety of the ACH Network. 

Plaid Auth enables consumers to easily and securely connect their financial accounts for ACH transactions by validating their account and routing numbers in seconds. For businesses onboarding new customers to fund accounts, transfer money, or pay bills via ACH, Auth is the fastest way to be compliant with Nacha’s account validation requirements. 

Plaid also offers customers the ability to authenticate end-user accounts through a combination of verifying Micro-Deposits and account credentials. Instant Match allows users to enter their credentials, account number, and routing number which Plaid then matches and authenticates immediately. 

Two types of Micro-Deposits are available: Automated and Same-Day. Automated and Same day Micro-Deposits have recently been improved to support the new Micro-Entries rule.

You can learn more about Plaid Auth here.