helping companies grow by providing an ach payment processor

You Want to Process ACH Payments. Do you Build it or Buy it?

January 13th, 2022

With ACH transactions growing the last few years at over 10% annually (according to NACHA – the regulators of the ACH system) many payment processors and ISOs are looking to cash in on that growth and capture additional revenue.

Offering ACH processing in addition to your current payment products is a way to grow revenue and increase client retention. If you or your organization are considering it, your options to do so are likely to either build it yourself or get it through a partner.

To build ACH yourself might seem simple, easy and risk-free. How hard can it be to simply credit one bank account and fund another?

What to Consider Before you Decide to Build Your Own ACH Platform

You Need Three Components to be in the ACH Business

  1. A bank to serve as your ODFI to send your ACH files to the Fed. Surprisingly there are not that many banks in the U.S. that actually do this. And if they do, often times their underwriting requirements and rules can be severe.
  2. An ACH platform to gather the transactions from software, gateways, terminals or however your clients send them. This platform also needs to screen them for validity. This can include hitting internal risk management systems and potentially outside databases for account validation.
  3. A company to sell, install and support the merchants. If you’re reading this, you probably already have that function.

In addition to these three functional items, it’s important to consider the financial exposure and risk assumed as a third party ACH processor.

Financial Risk Stems From Three Areas:

  1. Compliance Risk – NACHA regulates and audits all ACH processors annually for compliance with its rules and regulations.Furthermore, there are other entities involved in monitoring ACH processors such as BSA, AML and more.Building and maintaining these levels of compliance is costly and can be a large drain on resources.
  1. Merchant Risk – during an ACH transaction, a third party processor sends out an ACH debit to the consumer and funds the merchant via ACH credit.The processor’s most common exposure is when a consumer debit returns unpaid funds back to the processor. This can become the most costly exposure if the processor has already funded the merchant.In this case, the payment processor attempts to debit the funds back out of the merchant’s bank account.  As you might imagine, they don’t always clear. Maybe the merchant’s account is overdrawn, maybe it is closed. Maybe the merchant has their bank remove the processors authorization to debit, or number of other reasons.

In any event, the processor is out the entire face value of that transaction unless they can collect it from the merchant down the road. There are risk tools available to help reduce this exposure, but they don’t completely eliminate it.

Every ACH transaction run by a third party processor comes with financial exposure based on the worthiness of the merchant. This exposure is the main reason why most ACH processors cap merchants’ high-ticket limits at fairly low amounts.

How to Mitigate ACH Payment Processing Risk & Still Process High Tickets

What if you have a nice prospect with a solid business who needs ACH payment processing with limits of $10,000, $25,000, $50,000 or higher?

The idea of getting basis points of revenue off those transactions looks great. But at what risk?  Can you take the risk of losing $50,000 on one transaction? Checks bounce for many reasons and ACH payments are no different.

At VCI we have 30 years of risk management and ACH processing experience and being a bank-owned entity are fully compliant and regulated in all areas.  We are also uniquely built to handle high ticket and extreme high-ticket businesses in a way that is mutually profitable for your merchant, and your business.

Whether your decision to enter into the ACH processing industry is to build it yourself or partner with VCI, let us put our expertise and experience to work for you. Give us a call at 844.980.4VCI or email to start a program that generates you predictable and affordable new revenue for 2022.