Same Day ACH Causing Fears for Some Banks.
The adoption of same day ACH or Automated Clearing House payments is an important as well as timely innovation in the payments industry, allowing for faster transactions, quicker bill payments, and speedy access to payroll. However, this does come with its share of security risks. It certainly raises the workload for banks and other financial institutions that will need to regularly review thousands of additional transactions in an even lesser amount of time. With increased work load comes the risk of increased fraudulent activities and sharp spike in fraud due to the high volume and rapidness of review.
- ACH transactions in Phase 1 will be eligible for same day processing. This includes such transactions as same day bill payments, person-to-person payments, and hourly payroll.
- In Phase 2, it will include same-day ACH debits, including consumer bill payment like credit card, loan, mortgage, and utility payments.
The recent SWIFT hacking incident has sent alarm bells across financial institutions, forewarning of an increased risk of cyber threat. It is bad news for SWIFT, which has sent shock waves for banks around the globe.
FireEye, the cybersecurity firm probing the SWIFT incident, warns of an increased risk of such activities in other financial services organizations by the same minds behind the Bangladesh Bank cyberattack.
The interconnection and acceleration of payment systems gives cybercriminals more opportunities to come up with sophisticated fraudulent activities. This is one reason the banks aren’t too excited about same day ACH. Even worse, half of the financial institutions aren’t even aware of how they will deal with such cyber threats. Read my post about Same Day ACH Rolling Out in Phases Starting 2016.
Stressed Anti-Fraudulent Efforts
Same Day ACH will be rolled out in banks and financial institutions in the US starting September 2016. It will allow FIs (Financial Institutions) to provide new, quicker payment options with a tag of certainty and surety; however, researchers doubt the security of these transactions. More so, when about 70% of FIs do not have access to more fraud detection facilities and continue to use manual procedures to detect fraud.
The increased risk is also because of “operational challenges,” since FIs will need to work with three windows a day, including two new clearing windows for payment clearance. There is a high risk of fraudsters exploiting this to jump transactions just before window closure, so banks have less review time to investigate validity of transactions and can unknowingly approve the same in a jiffy.
The same day ACH raises the risk of business email compromise, since a bank has to speedily approve a transaction. Moreover, fraudsters can take advantage of account-to-account transfers and same-day payroll, which remain the most vulnerable of all transactions.
Related: How to Reduce eCommerce Fraud Risk
Bottom Line
Undoubtedly, the launch of same day ACH raises concerns about payment transaction security, with an increased threat of fraud attacks and losses. Banks have to be more vigilant and look for vulnerabilities so timely steps can be taken to block such malicious activities in the form of fraudulent ACH transactions.
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