I’ve been presenting and attending payments industry functions and find myself engaged with financial institution (FI) executives and administrators who are trying to determine whether their institutions can efficiently handle the growing volume of Same Day ACH transactions and effectively review them in a shorter period of time before they clear.
From my perspective, the wider use of Same Day ACH, especially when it comes to B2B payments, raises the stakes for more modern approaches to transaction risk management for both Originating Depository Financial Institutions (ODFIs) and Receiving Depository Financial Institutions (RDFIs). Technology, without a doubt, has a big role to play as payment networks become faster.
Some thoughts on the state of transaction risk management
More hires won’t meet risk management challenges. Businesses of all sizes continue to use Same Day ACH payments, and their use will increase with the per-payment limit being raised to $1 million. While higher volume and a per-payment limit increases are welcome by FIs, the specter of greater transaction risk should be worrisome to them—especially when relying on manual-only assessments that are still used by many of them.
Tackling Same Day ACH manually is an untenable option in Q2’s and my viewpoint, and adding more staff won’t lessen transaction risk in faster payment networks. Realtime payments being a case in point.
Adding more salary costs and more responsibilities to an already busy staff to address faster payments will only produce an undesirable outcome from a fraud prevention standpoint, and growing regulatory requirements that accompany growing payment volumes call for a more efficient, error-free approach. Automation and other technology options will help meet these challenges and requirements.
The right technology approach. A technology solution can play a larger role authenticating and verifying ACH payment senders, payment recipients, and transaction amounts from origination to receipt. This means automation and risk scoring aided by analytics will be more critical to top-line transaction risk management in 2022 and beyond.
Technology, on the whole, gives FI staff the ability to review and return transactions within hours, no longer in days—providing critical risk management scale to absorb growing transaction volume. And while the cost effectiveness of the technology matters and can vary widely, there are affordable solutions available that an FI can utilize to meet sender authentication, file(s) security, and transaction monitoring—and that can be implemented quickly.
If choosing a technology solution, stress-free UX is important. A better user experience makes for better transaction risk management. Today, conducting an annual originator review shouldn’t be an overwhelming or onerous experience. A solution of choice should help lessen the stress of staff by offering ease of use and robust features for quicker and more thorough assessment and management. And better UI/ UX for these tools yields efficiency gains that will improve the outlook and effectiveness of staff and allow them to concentrate on other growth areas of an FI.
Remove obstacles, friction. Granted payments are speeding up, and with the continued adoption of Same Day ACH and the advent of newer, faster methods like Real Time Payments, we’re still in the early innings of this phenomenon and technology-driven transaction management solutions will take on an even more important role.
No matter how your FI approaches transaction risk management, your success hinges on removing obstacles and friction. I’ve seen and continue to see the right technology removing obstacles and friction in both the immediate processing of the transactions and the monthly management reporting or annual originator risk assessment process.
Vendors who have made every effort to bring data and analytics together to aid auditing and decisioning efforts are the ones an FI should consider as a partner to today. I encourage you to read our guide, “Getting Ahead of Same Day ACH Risk,” for a further understanding on the direction of Same Day ACH payments and to receive insights about what to consider when assessing transaction risk management technology.