January 23, 2023

A Q&A with a leader in digital banking services and prepaid card solutions

Mollie Curran

In an exclusive conversation with Plaid, a leading provider of consumer and business payment solutions shares how they use Plaid to reduce ACH returns and create a better user experience.

With the rise of new financial services and technologies such as peer-to-peer payments apps, digital wallets, and cryptocurrency trading platforms, the Automated Clearing House (ACH) Network remains the backbone of the US financial system. In 2020, ACH processed 26.8 billion transactions worth a total of $61.9 trillion, an increase in value of 10.8% over 2019. 

While there are plenty of advantages for both businesses and customers that use and accept ACH payments,  the leading benefits are cost-effectiveness, universal availability with banks, high transaction limits, and a growing rate of adoption that’s been accelerated by the pandemic.

But with all the upsides, using ACH comes with its challenges. If a customer provides the bank information in order to make a payment, that payment can be returned by the bank as a result of insufficient funds, a stop payment request, or incorrect account information. Managing those ACH returns can be just as costly and challenging for businesses as it is for customers. 

To see how leading businesses are navigating that challenge, we asked a provider of digital banking services and prepaid card solutions to share how they use Plaid to dramatically reduce returns rates and create a better user experience. 

Plaid: What problem is your company trying to solve in digital financial services? 

Our mission is simple: to provide customers with the flexibility to choose when they want to move their money and what accounts they wish to engage in. 

Plaid: Why was ACH such an important part of solving that problem? 

Many of our customers already have an existing bank account and an even larger number have another prepaid or debit account. ACH gives them the flexibility they’re looking for when it comes to moving funds between their existing accounts.

Plaid: What are some of the biggest benefits of ACH for your product offering? 

To be successful in digital financial services today, you need to be able to offer users the flexibility and ease of use they expect. ACH gives us the ability to move funds easily for all types of customers and purposes. Plus, it can be accessed anytime, anywhere via mobile apps.

Plaid: What are some of the challenges you face with ACH? 

The biggest challenge with any type of financial technology is misuse or fraud. There’s always a fine line between blocking bad actors and giving good users the ability to use the feature to its fullest extent. And at the end of the day, no matter how many precautions you put in place, fraud can still find a way in. This can impact the return rate thresholds set by Nacha or lead to potential losses if the funds are released and spent before the return is processed by the ACH Network. 

Plaid: Why was Plaid the right partner to help you solve these challenges?

Since day one, Plaid has been integral to solving our fraud issues. When we made the decision to integrate Plaid Signal into our ACH offering, Plaid took the time to listen to our team and understand the challenges we were up against. Then they offered us a solution that not only met our business and compliance needs but also allowed us to easily adapt to our rapidly changing customer base. Having both a customer and bank risk score gives us the freedom to prevent transactions based on both aspects of risk ratings. 

Plaid: How did Signal help you manage those challenges? 

Once we enabled Signal, we saw an immediate impact on the quality of transactions that were allowed to be processed. In the first month alone, we saw our return rate on incoming transactions drop by 50%. As we were able to increase our volume and expand our product offering, Plaid helped us make additional adjustments to the allowed Signal score. Today, we are holding a consistent overall return rate that is 83% lower than what it was before we implemented Signal. 

Plaid: What was the experience like implementing Signal? 

The integration was seamless. The technical support we received throughout it was outstanding. Plaid was always available to answer any questions my team and I had. They even collaborated with us to determine the best approach for integration and configuration. With Plaid’s support, we completed the development effort within a week and rolled out the solution the following week. 

Plaid: How has Signal helped you deliver more value to your customers? 

Plaid allows us to deliver programs with ACH to more customers in more places with proper risk controls in place. We no longer have to choose between offering our customers a seamless or safe user experience. With Plaid, we can provide both. 

Plaid: How has Signal impacted your business? 

Plaid has enabled us to reduce returns and bad actors. All of this has allowed us to scale our operations in more ways and in record time. 

Plaid: What advice would you share with similar companies that are battling the challenges of ACH?

Connect with Plaid early on in the process. That will give you the opportunity to discuss all of your available options. Research the types of returns and fraudulent activity you’re seeing and share it with Plaid. They’ll give you the experience and guidance you need to overcome any challenges that you are facing. 

Plaid: Looking ahead, what’s your top priority these next 18 months?

Now that we’ve firmly established ACH as a part of our product offering our goal is to continue to expand ACH services to existing and new users of our alternative banking services. 

Ready to unlock instant ACH and reduce return risk?