Everything ACH

I get a lot of questions asking for advice on how to do this or how to do that and while that wasn’t the original direction of this blog, I decided to branch out a bit and do some ‘How To’ writing. 

I thought the best first question to go with, relates to deciding whether to use an ODFI or a Third Party Processor (TPP). 

The question comes in many different forms, but the bottom line is that there is no easy answer.  Here’s the deal; every Originator is different.  Their needs are different, their goals are different, their level of ACH/Legal/Technical knowledge is different and of course, their budget is different.

So, while I cannot give you an answer as to which is better (well, I could, but some might argue that I’m biased – after all, I work for a Third Party Processor – I’ll try to be objective), I can give you some food for thought.  Here are some things to consider that I hope will make your decisioning process easier;

Existing Relationship: 

There is something to be said for an existing relationship – assuming you’re happy.  Chances are, you already have a relationship with a Financial Institution (FI).  If your FI operates as an ODFI, it could be simple enough to leverage and expand that existing relationship by simply adding ACH processing.  If your FI does not offer ACH services (or they don’t process the type of transactions you need) then you need to do a search.  At this point, if you have to weigh the difference between searching for a new banking relationship vs. a TPP, go for the new TPP.

This might also be a search by design – meaning your upper management/executives/board of directors might require you to select a number of vendors and go through a sort of bidding process.  If you go this route, I highly recommend expanding your options to include both ODFIs and TPPs.

Underwriting:

Whether using an existing relationship or a new one, you will likely have to go through an underwriting process – kinda like the last time you got a car loan.  This is what the ODFI or TPP uses to determine whether they want to process for you.  There is a ton of information that go into making this decision.  Everything from your company (and perhaps personal) credit score, financial stability, type of business, number of years in business, type of transactions you’re planning to process and much, much more. 

This is where that existing relationship can come in handy.  An ODFI that has known you for 10 years might be a little more forgiving when looking at a low credit score vs. a TPP.  On the flip side, the TPP might be willing to accept some transactions that a typical ODFI might not – based on risk.

If you find yourself being turned down by an ODFI or TPP, be sure to ask if you can get a referral to another that might be willing to work with you regardless of whatever kept them from working with you.

Reporting:

I used to think this was a no brainer, but I cannot tell you how many Originators I have spoken with over the years that didn’t think about reporting or thought about it, as an afterthought vs. part of the process.  I don’t know what information you need to do your job, but you do – or you should.  Whatever information that is, that’s what you should be looking for. 

Get sample copies of reports everything the candidates offer.  Understand the difference between standard reports vs. ‘we can do that’ reports.  Also, reporting should be an easy download or upload into your existing software – accounting or CRM compatibility is a good thing.

It’s important to get input from every department that might be using these reports and be sure you have everyone covered.  Your co-workers will appreciate the opportunity to provide their 2 cents.

Pricing:

Decisions of all sorts eventually come down to the almighty dollar.  This is where a TPP might have an advantage over an ODFI.  When you process with an ODFI, you are getting pricing based solely on the volume you are processing.  When you process with a TPP, you are getting pricing based in part on the total volume they are processing (that’s you + all the other Originators they process for).  If the TPP is processing a greater volume than the ODFI, then they will likely have a lower base price.

That being said, there is also a thing called ‘market price’ or pricing to what the market will bear.  With that in mind, think about this…just because your business is located in Anywhere City, Missouri, doesn’t mean you have to select an ODFI or TPP based in Anywhere City.  Just like everything else, there is competition and in larger markets you tend to find more competition.  Of course you also tend to find higher prices.

Be aware of hidden costs too;  per transaction fees, batch fees, file fees, monthly processing fees, hard copy invoice fees, return fees, charge back fees, ‘you weren’t looking so we charged you an extra $5.00 fee’ fee, and who knows what else.

The most expensive option is not always the best and conversely the least expensive is not always the cheapest.  When it comes to bidding processes, I have a former boss who advocated tossing out the highest and lowest bidders and selecting from vendors in the middle – there’s a lesson in there somewhere.

Customer Service:

Let’s face it, we all have examples of companies that have provided awesome customer service to us and we also all have examples of companies that have provided horrible customer service.  Be sure you understand what days and times Customer Service is available and find out what their turnaround time is…whether it be a simple question or a problem, if you have to leave a message, when will they get back to you.

If you don’t know the answer, you won’t know what question to ask.  What education do the Customer Service folks receive?  Do they get regular update training – like booster shots; monthly, quarterly, annually, ever?

A good customer service experience is worth its weight in gold.  If you have more than 1 not-so-great experiences, consider moving on to the next candidate.

Some last pearls and tidbits:

Don’t Be Afraid to Ask Questions – lots of questions.  The only stupid question is the one not asked.

Shop Around – don’t limit yourself geographically – there’s a whole country out there.

Due Diligence – I cannot stress this enough – include others (if possible) in your decisioning process. 

Peer Reviews – talk to your peers – who are they using – who do they recommend – have they heard of or used XYZ Company.

Trust Your Gut – if something doesn’t feel right, it probably isn’t.

Those are just my thoughts on this process.  I’m sure there are other things to take into consideration and if you’d like to share with the rest of the class, drop me a line.  I’ll gladly include your 2 cents and of course, give you credit.

ACHGuy

UPDATE:  May 19, 2010 – I made a goof on the survey; The survey says that I’m giving away a copy of the 2010 ACH Rules Book – Corporate Edition, while the post says I’m giving away “a very cool and stylish padfolio, a tres cool light up pen, an ACH Direct mug and leather coaster.  You’ll each get a package containing all 4 items.”

Just to make life easier, I’m now giving away both a copy of the ACH Rules book – Corporate Edition and the great package of ACH Direct stuff.

With that, I’m extending the deadline to take the survey until June 2.

I apologize for any inconvenience and I hope you’ll take my survey,

ACHGuy

You have me at a disadvantage…you know who I am, but I don’t know who you are.

 I told you that I was going to put together a survey to find out who my readers are, and here it is.

 It won’t take you long and you don’t even have to tell me your name, just a few questions about who you are and what you think about my little blog.  And, I would be most grateful.

Here is the link:  http://www.zoomerang.com/Survey/WEB22AHPLRLUQX

Thank you for participating in the first ever survey of the readers of the ‘Everything ACH’ blog. 

As an additional thank you, I am planning a drawing for some great ACH Direct goodies.  I think 2 winners will do nicely.  Up for grabs is a very cool and stylish padfolio, a tres cool light up pen, an ACH Direct mug and leather coaster.  You’ll each get a package containing all 4 items.

 IF you would like to participate in the drawing, you will of course have to provide some additional information – see question #11.  The drawing will take place on May 19.  The winners will be notified by e-mail.

Thanks for sharing.

ACHGuy

But I haven’t figured out why it’s going so fast for me.

I’m just kidding, you know I love what I do.  And I love working on this blog, and it really bothers me that I’ve been away so long.  I have been responding to a few recent comments and questions, but it’s not the same as a full-fledged post.  And so I have decided that today, I’m going to write one.

So, here goes…

2010 is upon us.  It has been, for 21 long days and I’m just now putting some serious thought into where I am heading this year.  I have so many things that I want to do both personally and professionally but I wanted to share a little about my goals relating to Everything ACH.

Firstly, I plan to remain true to my original goal having this blog be all about ACH.  However, I would like to make an effort to expand that goal a little by being more responsive to industry news and more consistent on regular postings. 

With over a thousand visitors a month, I decided that it was time to figure out who my audience is.  I think the first rule of marketing is Know Your Audience?.  Maybe.  I am working on a brief survey, only a few questions, but I would be most grateful if, when it comes out, you would take a stab at it.  That would be very cool.

In addition to industry news, what kind of an educational blog would this be if I didn’t give you the occasional heads up about an educational event?  As you may know, we host a series of FREE webinars every year.  They start in March – details to come.  I will not be advertising to you, but there are a few industry events every year that are definitely note worthy and I’ll try to get word out on those that I think will be important to you.

And finally, I plan on flossing more regularly.

I think that’s about all I got for now.  I’ll be back soon, very soon.

ACHGuy

I wanted to take a short break from SEC Codes.  Don’t get me wrong, I know it’s riveting reading.  But I wanted to celebrate for a moment instead.

I want to celebrate 2 things;

1.  We recently completed our FREE 2009 ACH Educational Webinar Series and I just wanted to say thank you to all who participated – you know who you are.  And, of course, a big thank you to the fine folks at UMACHA – Kate Cole, Donna Olheiser and Angi Farren and EPN’s (Electronic Payments Network) Laurie Applebaum for their time, energy, knowledge and patience.

We started the ACH Educational Webinar Series in 2007 with a series of 6 targeted ACH educational offerings.  The program has grown and this year we had 7 ACH webinars and 2 Check webinars.  The check training was a nice departure from the norm for us and also a great learning opportunity.

We are already hard at work for 2010 and as soon as we have the dates nailed down, I’ll let you know.  While we will continue with training at the beginner level, it works nicely for folks new to ACH, those who have been around for a while, but wanting some formal training, a refresher for those already in the know and of course, earning continuing education credits is not a bad deal either.

It has been a wonderful year of learning and I hope we all benefitted.  I know I did.

2.  October was a banner month for Everything ACH.  We surpassed 1,100 visits for the month.  I cannot begin to describe how excited I am about this.  If I recall correctly, during the first month – August 2008, we had only 12 visitors.  It was several months later when we finally broke the 100 visitor mark – January 2009.  We had 450 visitors that month.  I was amazed. 

In October, our official number was 1,137 visits.  That makes almost 7,500 visits so far this year – through the end of October.  I hope this means that I am writing about stuff that interests you and that you are learning.  After all, that’s the goal. 

All along I have received some great questions and comments in support of my work.  I would love to hear more – any feedback is welcome…questions or comments.

I have every intention of continuing my work of trying to explain ACH in a plain, simple, easy-to-understand manner and I hope you’ll stick with me.

That being said, thank you.  Thank you for visiting.  Thank for returning.  And thank you for passing the word. 

Hope to see you back soon,

ACH Guy

by Jay Alsup – Marketing Manager

As a marketer, taking a job in a new industry can be a challenging task – adjusting to the new work flow, managing multiple business silos, following up with inherited deadlines, and oh yeah, actually learning about the intricacies of the new product offerings you are in charge of promoting.

Learning the nuances of my new digs along with multiple product lines was business as usual, but as I shifted my marketing career into the payments industry, I quickly noticed I had taken a step in to what I like to call Acronym World.  

Our trip to Acronym World can be somewhat of a refresher course for all of us…kind of like cramming for that 100 word vocabulary test the night before the exam while watching TV back in high school – yes Mom, I can watch this show and study at the same time…geez!

It was obvious I would be entering a new domain even with our company name itself – ACH Direct.  Hmmm…what is this ACH stuff, I’ve seen it on my bank statement before, but what exactly do those letters stand for?

ACH – Automated Clearing House:  The electronic payment Network which exchanges funds via EFT.

Great, even the definitions in this world have acronyms – EFT.

EFT – Electronic Funds Transfer; the transfer of funds from one bank account to another bank account utilizing the ACH Network.

Where there is money, there’s sure to be banks, and yes, the banks in this business are allotted specific terms as well.

ODFI – Originating Depository Financial Institution; the bank that initiates an Electronic funds transfer through the ACH Network on behalf of the Originator.

RDFI – Receiving Depository financial Institution; The financial institution that receives an ACH transaction for a holder of an account.  

So we’ve got all these terms, money going back and forth involving banking institutions, individual bank accounts involved, and complex payment processes all around us.  How is everything regulated?

Within this industry there are 19 regional ACH associations that provide rules and guidelines for the efficient operation of the ACH Network.  Naturally, the governing body for these organizations introduces us to another inhabitant of Acronym World – NACHA (this is “NACHA” ordinary organization…sorry, I couldn’t help myself).

NACHA – National Automated Clearing House Association forms the governing foundation for the regional associations and is also the chief rules making and interpretation body of the ACH.

The complexity of the terms in this industry can seem quite overwhelming at times, but the beauty of the resources we provide at ACH Direct not only benefit our team internally, but also provide top notch support and training to merchants of all sizes. 

ACH Direct hosts a series of free educational webinars which are developed and delivered by an accredited ACH professional from UMACHA (Upper Midwest Automated Clearinghouse Association), a highly respected and prominent regional payments association.  Click here for details.

Feel free to pop in for a few sessions and invite along anyone you think might benefit from taking advantage of the demand for electronic payment methods in today’s marketplace.

Thanks for spending some time with me today.  I’m looking forward to our next cram session…I’ll bring the popcorn.

 - Thanks to Jay for a great post today.  I hope you all enjoyed it and if we’re nice, I’m sure he’ll come visit us again. – ACHGuy

I have come to the conclusion that some people simply make things look easy.  The guy who juggles chainsaws, the teacher who teaches 18 five and six year olds or the waitress who slings out food and drinks to a table full of rowdy patrons.

We’ve all seen the guy, on TV, in movies and perhaps even in real life who says, “Well, I can do that!”.  He then of course proceeds to make a complete and utter fool of himself and we all laugh at him on the outside while thinking on the inside, “Wow, that’s not as easy as it seems”.

Being an RDFI is one those things.  I know that I tend to downplay the number of responsibilities when making comparisons between the RDFI and some of the other ACH participants.  However, please understand this does not make this party or their responsibilities any less important.

To my mind, it all comes down to the timing.  Just like the juggler has to time his hands to the fall of the chainsaw, the RDFI has to have the art of timing down too, for example;

Posting: 

Credits must be posted on Settlement Date, by 9:00 AM (local time) or opening of           

business whichever is later

Debits must be posted on Settlement Date

It is a common practice for FIs to post Credits first and then Debits. 

          Returns:

                   There are essentially 3 types of returns that RDFIs deal with;

Regular Returns:  Most returns fall into this category.  These are the NSFs, Account Closed, Invalid/Incorrect Account Number, Stop Pay and such.  The Rule of Thumb says that RDFIs must send these returns within 24 hours.  In reality, RDFIs must work their exception items the same or next day after received.

Extended Returns:  These are the Unauthorized and Authorization Revoked type returns.  RDFIs have 60 calendar days to return transactions using these return reasons.

Contested Dishonored Returns:  These are the rarest of Return Reason Codes.  There are only 5 reasons for which the RDFI can use them.

          Statements:

RDFIs are responsible for providing certain information about each and every ACH transaction on the account holder’s monthly statement – in a timely manner.

There are other responsibilities too, such as performing an annual ACH Audit, ensuring their account holders are aware of their own responsibilities, maintaining copies of everything for six years, etc., etc., etc.

Regardless of what else the RDFI might do, they do it effortlessly and they do it well.  In fact, you could say they make it look easy.

Welcome to the Everything ACH Blog.  Everything ACH, Everything ACH, Everything A…C…H.  Hmmmm…you might be asking yourself: What is ACH? 

Well, ACH stands for Automated Clearing House.  Basically, ACH is a network of financial institutions connected for the purpose of exchanging money and data.  Some common uses of the ACH Network are Direct Deposit of payroll and/or Social Security benefits, eChecks, Direct Payment such as payment of your mortgage or insurance and more.  For a really good explanation, see my blog entry titled “How Do You Spell ACH?“

And the ACH Network is big, really big.  In 2007, there were over 18 Billion transactions for a total of about $32.9 Trillion.  Yup folks, that’s Trillion with a “T”.

So I guess the next question on your mind is; Who is this guy? And what does he have to blog about?

Please allow me to introduce myself.  My name is Jeff Gonzales.  I am the Director of Compliance at ACH Direct.  I have been with ACHD since January, 2006.  I have been in the compliance game for about 11 years and for about 8 of those years, combined compliance and marketing which admittedly is an interesting mix.  I was certified as an AAP (Accredited ACH Professional) in 1998. 

Prior to ACHD, I worked for 8 ½ years at SWACHA (Southwestern ACH Association).  SWACHA is one of the Regional Payments Associations, connected to NACHA (National Automated Clearing House Association). 

I am also just beginning my 2^nd year on NACHA’s Internet Council and am a member of the Marketing & Education and Mobile Payments subcommittees.

And finally, what am I going to blog about?  I plan on talking about ACH.  After all, the blog is titled Everything ACH.  My plan is to talk about ACH in general, what it is, how it works, who’s involved as well as some of the specifics.  I want to talk to you, I want to teach you…

I hope you like it and I hope you visit again and again.  I am new to blogging, but I welcome feedback, constructive criticism and honest conversation.  On to the blogging…