Jack Henry™ (Nasdaq: JKHY) announced an expansion of its existing relationship with Mastercard® that will enable credit unions and banks to provide their accountholders the ability to securely see all of their financial accounts – within and outside their primary financial institution – in one place. Together, the companies establish a partnership that makes secure, API-based data-gathering affordable for community and regional financial institutions.
Through this collaboration, financial institutions can offer their accountholders secure access to external providers and financial data — consolidating, categorizing and enriching that data in a simplified digital experience.
Read more about this expanded partnership here.
For 44 million Americans, the weight of unyielding student loan debt is a major cause of stress and anxiety, a barrier to homeownership and can be a lifelong impediment to building wealth. Nationwide, the total student debt level stands at a staggering $1.7 trillion. Managing that debt has proven to be complicated and inefficient for borrowers and lenders alike.
Bottom line: Access to consumer-permissioned student loan data presents a unique opportunity. Innovators can step in and create apps and build better services that leverage student loan data through Finicity’s open banking platform, to help consumers with student loan debt.
Introducing Normalized Student Loan Data
For fintech innovators, lenders, refinancers, employers and institutions of higher education, working with student loan data has been challenging. Until now, the data hasn’t been normalized. Higher learning institutions have used different naming conventions for data fields, making documentation harder to read, compare or translate. Lenders and servicers have to navigate a forest of screenshots, phone calls with lengthy hold times and unsecure paper documents in their efforts to verify loan information.
These time-consuming manual processes incur labor costs to lenders and servicers. This can cause stress, revenue loss, time loss and negatively impact the lender’s operational efficiency.
Finicity has normalized the data across data fields, vocabulary, naming conventions and applications of rules, resulting in a modernized ecosystem for all stakeholders through its open banking platform. This significantly reduces the time to market for your student loan solutions.
Innovation Platform Using Student Loan Data
Student loan data doesn’t have to be confusing or complicated. With Finicity open banking, an optimized API call can help reduce costs, and is delivered in a formation that doesn’t require additional coding. Our API endpoint can yield the complete loan details, and the full payment details of a student loan account, including up to 24 months of transaction history.
- Normalized, comprehensive data covering most student loan accounts. It’s delivered through our open banking platform, with connections to student loan accounts that include federal Direct Loans, FFEL & Perkins, and some of the largest private lenders and servicers (e.g. Navient, Nelnet, Aidvantage, Sallie Mae, Discover, Firstmark, Commonbond, LendKey, etc).
Quality of Data
- Extensive Loan Account Details: An API call to the Fincity open banking platform can yield a primary account, transactions by account, loan payment details, statements, account owner and much more. Data is aggregated at the three largest levels of the student loan hierarchy; student loan, student loan group and student loan account, while also being able to provide customer & institution-level details.
- Transaction lookback period has been extended to more accurately capture transaction additions or changes. Up to twenty-four months of transactions can be offered in one API call for an extended view of account history.
- Complementary data insight solutions with analytics of a borrower’s credits, debits and balances to deliver smarter credit decisioning.
- Reliable Uptime Data Monitoring: Multi-tier data integrity and student loan-specific data monitoring.
Create Winning Borrower Experiences
Innovators can quickly develop and scale new and improved financial services with Finicity’s open banking platform. Student loans are the second-largest debt sector in the United States. There is a massive opportunity to develop new apps and services to help individuals with student loan debt. Through partnering with our clients, Finicity’s open banking platform is powering solutions to help the 44 million Americans who carry student loan balances.
Some of the ways innovators can upgrade the borrower experience, using permissioned student loan data:
- Create frictionless onboarding and account setup for borrowers to apply for loans, set up accounts, manage repayment and distribute funding to students.
- Better data for better credit decisioning. It’s pretty simple. Student loan borrowers want a better experience. Lenders want the most accurate and real-time data for better credit decisioning. So we’ve combined the best data with smart insights to transform the lending experience.
- Finicity data powers leading personal finance management (PFM) apps. These tools allow borrowers to view, monitor and manage their debt in near real time by pulling smart, categorized and permissioned loan data into the app. If borrowers can easily understand their financial position and repayment options, they may reduce stress and more effectively manage their debt.
- Attracting and retaining the best talent in today’s job market is a challenge for any company. Leveraging permissioned student loan data, some employers are creating benefits like 401k accounts that match student loan payments and direct matching of student loan payments back to the student loan.
- By using the account details endpoint, it’s possible to verify that a student is enrolled in at least half-time coursework by the National Student Loan Data System. Using this data, a rich field of possibility opens up for student-specific benefits. Discounts, rewards and loyalty programs can be built specifically for current students.
- Even the more administrative aspects of student loans can be modernized by open banking technology. Student borrowers can be offered the ability to easily and securely apply for federal programs like Public Service Loan Forgiveness or an Income-Driven Repayment plan. No wading through W2s, paystubs and long, frustrating calls to student loan servicers. Quick and secure.
Step Into the Future
Break out of the spider web of paper documents, screenshots, phone calls and mismatched data. Replace countless lost hours of productivity with optimized API calls that offer the comprehensive, relevant, normalized data to build solutions on.
Innovate with us to create knowledge-based services that empower students, so they can manage, consolidate, refinance and repay their obligations with the level of transparency that they deserve.
Searching for the best open banking network, or what historically people referred to as financial account aggregators can mean combing through a ton of choices. In fact, when you search for financial data APIs on review site G2, you’ll see a whopping 92 options. How do you parse through so many companies to find the one right for your fintech company’s needs?
Because it can be a difficult decision for fintech companies, we’ve put together this guide to define financial data aggregation and to help identify the features to look for.
Understanding Financial Data Aggregation
Account aggregation, also known as financial data aggregation, is a process that collects a person’s financial data in one place. This data can include checking and savings accounts, transactions, investments, credit and tax data.
Having this data in one place benefits many parties, not only consumers. It also benefits banks, lenders, investors and financial advisors. A lender, for example, can use account aggregation to see all the relevant financial information for a consumer applying for a loan, including their transaction history, employment history, income, assets and more. Individuals and families can use the aggregated data to make better financial decisions and small and midsize businesses can use it to better run their operations or access critical capital. Fintech companies can use it to make better apps for their clients.
At Finicity, a Mastercard company, we believe that true empowerment of consumers comes from giving them full control of their data. Consumers should have total control over how their data is used, how frequently it’s accessed and how long it will be retained. The steps to manage data permissions should be easy, quick, and intuitive. Aggregators and ecosystem participants can work together to ensure the highest level of clarity and accessibility, making it easy for consumers to understand and manage their data permissions.
In addition to pure convenience, financial data aggregation through open banking eliminates the need for each party to update this data manually. This saves time and minimizes mistakes for both companies and their clients. It’s all part of open banking—allowing consumers, financial institutions, and third-party providers to access consumer-permissioned data for empowering consumers and small businesses through new and innovative financial services.
How does it work? Historically, data has been collected through screen scraping with a secure login. Much of today’s innovation has been built on the foundation of screen scraping. Recently, however, more data aggregators are using direct API connections with a financial institution. Finicity, for example, pulls the majority of its data through direct API connections in the United States. This method provides cleaner data and is more secure because it uses tokenized access instead of consumers’ login credentials.
Data aggregators use bank-level encryption, which safeguards the personal and financial data of consumers. Finicity operates its aggregation platform with a transparent, consumer-first ethos. Consumers should be explicitly informed in plain language how their data will be used and who will be using it.
What to Look For in Open Banking Providers of Financial Data
When you’re searching for financial data aggregation services, you’ll want to find one that has wide coverage, core provider capabilities and specialty products for your company’s needs. It should also maintain a good price point, with a user-friendly platform and the assurance of accurate data.
Does the aggregator have a wide breadth of access to financial institutions, or do you need a depth of coverage in one area? Finicity maintains its connections, which cover more than 95% of financial accounts. This means that anyone who uses our services can be confident that they will get the best possible insights into their client’s financial situation.
While there may be many companies that offer data aggregation solutions, many of them are simply reselling data from another aggregator. Finicity is one of a select few aggregators who maintain all of their connections to banks, credit unions and other financial institutions. When errors arise, you want to be dealing with the actual provider of the data, who can make changes. Otherwise, you may be consuming data they’re getting from somewhere else, and never have the ability to make essential adjustments.
You also want to know where your data is coming from for traceability purposes. Knowing how many different companies touch the data can also be an important piece of the puzzle.
Does the aggregator specialize in your industry? Whether you’re a lender, financial advisor, investor or private individual, it’s important that your financial data aggregation software be tailored to your company’s needs. For example, if you’re a lender, you’ll need to see assets, income, employment, cash flow, statements, transactions and scoring attributes to ensure that you are making the right decision. Where the data comes from is also important. Does the aggregator connect with the largest investment brokerages or stick to simply banks and credit unions? The source of the data is also an important component of an aggregator’s specialty.
What’s your budget? Where’s breakeven from a revenue and cost perspective? Many financial aggregation companies offer pricing on a tiered basis by volume, which may be something like free trial, pay-as-you-go or enterprise. Determine what your needs and priorities are—maybe you need verification of assets but not verification of income. See which tiers or packages offer your highest priority data and what your expected volumes would be.
Are the APIs readily available for you to use? If fintech companies can’t test out APIs before making a commitment, it’s hard to know if the features and user experience will fulfill their needs.
“The industry has been around for more than 20 years and technologies vary when it comes to working with a modern development team,” said Michael Deleon at Tearsheet. “You’ll want to find a match between your firm’s capabilities and the UI/UX of the data aggregation industry.”
Is the data they’re pulling cross-verified with multiple data sources and bank-validated deposit streams? You want to be confident in the quality of the data. That way you won’t have to do any further cleaning of the data and can plug what you receive directly into your current workflows.
Why Finicity is One of the Best Financial Data Aggregators
If you’re one of the many fintech companies looking for a financial data aggregator, Finicity is a great option for you. Tearsheet did a handy comparison, and if you’re here you’ve probably already heard about our competitors.
How does Finicity compare? No other data aggregator subjects their products to the FCRA, a statute that focuses on consumer rights and protection. Additionally, our data is battle-tested in the most rigorous lending market, mortgage, so you know you can count on its accuracy. We lead the way in coverage in the United States, with access to over 95% of financial accounts. Finally, our platform has deep data intelligence to deliver data in a smart way with the insights you need, whether you need it for payments, lending or helping your customers manage their money.
The best open banking platforms provide the vital links that allow fintechs and traditional financial services providers to continue building innovative products and services that enhance the customer experience.
- Data coverage and reliability – Finicity’s open banking platform provides direct API access so you don’t have to worry about connecting across different standards or connection types. Being the leader in direct data connections to financial institutions ensures the most reliable data direct from the data stewards (banks, payroll providers, wealth management firms, etc.).
- Data analytics and quality – The data you get out of those connections is tested daily and has been proven by the most stringent investors for its accuracy, usable insights and key data analysis. Finicity data is widely used for verifications, scoring, cash flow or other analytics.
- Trusted partner in innovation – An open banking platform should be your partner in innovation. Finicity provides the right data, from the best sources, over the best connections. This means you can rapidly integrate, innovate and move your products forward, staying ahead of the industry and your competitors.
We know that finding a data provider can be a daunting task. As you begin your search, request a demo of Finicity to see if it’s the right data aggregator for you. If you’d rather test out the technical side of things, check out our developer documentation.
Finicity, a Mastercard company, makes the ACH transfer process more secure and more consumer-centric with our open banking platform. Automated Clearing House (ACH) payments are one of the most-used payment rails and are a streamlined form of Electronic Funds Transfer (EFT). In 2020 alone, ACH moved $61.9 trillion in transactions. Strictly for payments moved between US-based banks, these electronic payments operate as paperless checks.
Payments are issued in two forms: ACH credits (push) and ACH debits (pull). Understanding the difference between the two can help you understand how to better leverage ACH credits and debits in your everyday business transactions.
What Is an ACH Debit?
An ACH debit transfer “pulls” funds from the payer’s bank account. If you’ve ever set up a recurring bill payment online, this is an example of a pull. In order to initiate an ACH debit, the payer must give their account and routing numbers to the payment receiver (who requests the payment), and give them permission to access the funds. The Nacha Web Debit Account Validation Rule requires the account to be verified before the first payment can be issued from it. While various verification methods are available, verification can happen by confirming the account number, or by the account owner giving permissioned access to it through an open banking portal.
What Is an ACH Credit?
An ACH credit transfer “pushes” funds to a bank account at the request of a payer. If you receive your paycheck through direct deposit, it comes through an ACH credit transfer, in which your employer is requesting that funds be moved directly from their bank account to yours. You can also make payments in the form of an ACH credit, but unlike an ACH debit, you would initiate the transfer.
How Do ACH Transactions Work?
ACH transactions happen in two key steps:
- Initiating the payment: Before a payment originator can initiate a transfer, they must receive permission to either push or pull funds to or from the account. Originators can receive permission by signing an ACH authorization form or through verbal agreement. This authorization phase is also when the transaction is marked as either a one-time or a recurring payment.
- Receiving the payment: Once the ACH transfer has been authorized, your bank account will either push or pull the funds, depending on whether it’s a credit or debit transfer. If there are insufficient funds to push or pull, the payment can fail. In some instances, this can result in overdraft fees for the account holder.
Direct Deposits and ACH Transactions
Direct deposits have become the preferred method for issuing paychecks, both for employees and employers. Depositing payment directly into an employee’s account via the ACH network is a streamlined option. It also removes the fraud risk and processing delays of paper checks. Direct deposits are a type of ACH credit transfer, where employers push funds to an employee once they’ve received and verified the employee’s account and routing numbers.
What Are Nacha’s New ACH Debit Rules?
Nacha’s central role is to facilitate the ACH network. Their top priority is ensuring that funds transfers are secure. In order to better protect the network as a whole, as well as individual businesses and consumers, Nacha implemented a new rule that applies specifically to WEB (online-initiated) debit transactions.
Under Nacha’s operating rules, originators of WEB debit entries are required to use a “commercially reasonable fraudulent transaction detection system” to mitigate fraud risk. As of March 19, 2021, Nacha added account validation as a central component of fraud prevention. Any WEB debit originator now has to validate an account before first use, or when an account number changes.
Common Questions About ACH Transfers
How Long Do ACH Debit or Credit Transfers Take to Clear?
Because they are processed in batches, ACH transactions can take longer than other forms of payment to clear at the receiving bank. Some banks may offer same-day ACH payments which adds an extra window for submitting transactions, but most financial institutions charge extra because they’re moving toward faster payment options.
What Are the Security Risks of An ACH Transaction?
As with any form of payment, there are security risks associated with ACH transactions. For example, with access to routing and account numbers, criminals can authorize fraudulent ACH transfers. Nacha regularly updates this page with the most current ACH-related threats.
Following Nacha’s guidelines and using secure ACH payment solutions will mitigate the security risks associated with ACH transactions.
What Are the Benefits of ACH Transactions Over Other Types of Payments?
ACH transactions are the most widely-used payment rail because they’re simple and secure. This makes them the obvious choice for exchanging payments via the internet. Some advantages of ACH payments include:
- ACH is the backbone of every disbursement, bill payment, and P2P financial services app. It’s the universal standard for sending and receiving money.
- Lower fees than wire transfers and other EFT formats.
- ACH transfers are convenient, thanks to the ability to set up recurring payments, and you can make ACH payments from anywhere.
Are ACH Transfers Right for My Business?
Many businesses leverage ACH transfers to pay vendors and receive payments from customers, in addition to paying employee salaries. The speed, convenience, and security of ACH payments are behind today’s most successful businesses, assuring a positive impression of your brand. If your company is frequently moving money, making large payments or if it isn’t as important when the transactions goes through ACH transfers may be the right choice.
There are areas where ACH could be improved. It lacks a seamless returns process and there isn’t a dispute mechanism for consumers. It lacks transparency and immediacy in many ways, which is why when fraud occurs it can be costly for merchants and businesses.
Enabling ACH Transactions with Finicity
Finicity, a Mastercard company, can help you make the ACH transfer process more secure and more consumer-friendly with our open banking platform. Through our payment data solutions, we offer instant account verification. This enables originators of ACH transfers to verify crucial account information in real time, increasing the likelihood of successful payments and reducing friction like microdeposits or manual entry. Finicity’s products also offer balance checking to give confidence that funds will be available, reducing the potential for costly insufficient funds returns. However you’re interacting with the ACH network, Finicity’s products are here to enhance the experience.
ACH credit and debit transactions are driving the exponential growth of today’s financial services innovation. To find out how we’re taking ACH to the next level, request a demo today.
In a hyperconnected world, it’s hard to name a transaction, financial or otherwise, that takes more than a few moments. Much of our business and personal lives take place on a tiny mobile screen. Instant results are the universal expectation. Buying a pair of shoes, commenting on a social post, and paying utility bills are all part of consumers’ continuous, uninterrupted flow. If it happens on a screen, it has to be now, now, now. Secure account opening is no different. Make your customer wait, and they’re gone.
While account opening should take only seconds, issues like manual uploads and microdeposits add delays. Finicity, a Mastercard company, is addressing this new reality aggressively, stripping away friction points in the account set-up, onboarding and funding process. Open banking introduces new ways for financial institutions to verify account ownership and authenticate credentials. Accounts are opened and funded in moments, with a full package of data that includes account owners, details and balances. This creates the perception of immediacy that the end-user expects throughout their on-screen day.
Locking Fraudsters Out of the System
Understandably the risk, compliance, and customer experience balance is delicate. Efficiency can’t compromise fraud prevention. That’s why Finicity built its payment solution behind a driving principle: Pay Confidently. This means secure, lightning-fast account credential and balance verification. Financial service providers can verify account ownership and simplify the process by implementing their own application pre-fill functionality. Access to bank account data with instant account verification boosts sign-ups, reduces non-sufficient funds (NSF) fees and lowers abandonment rates. The connectivity is also useful when customers have an existing relationship with an FI but want to move money or add services. Data services help FIs verify account details and balances in milliseconds so they can move money accurately and securely.
Throughout the 2020 COVID-19 lockdowns, online fraud attacks rose by 250%. By far, the majority of them were account takeover scams, where fraudsters steal credentials and account information to siphon funds away from account holders. These attacks rose by a staggering 650%. In 2020 alone, the FTC tracked $3.3 billion in fraud losses to consumers. The convergence of fast-paced digital banking growth and a new wave of inexperienced customers created an opportunity for criminals to exploit. Finicity built its payment solution to cancel out these threats. Finicity Pay uses secure, tokenized access that yields no meaningful data if hacked. Our account verification service instantly and accurately identifies the account holder, stamping out account takeover scams before they get started. The user experience is positive, fast, and most importantly, onboarding is completed at the exact moment that the consumer wants to complete it.
Why Finicity Open Banking?
- 95% Market coverage of direct deposit accounts. From the largest FIs to the smallest credit unions – Finicity has you covered. Receive fast, reliable financial data that has been permissioned by the consumer for their benefit. Finicity is leading the industry towards direct API connections, signing Data Access Agreements with the largest financial institutions, payroll providers and wealth management companies.
- Added intelligence and deep learning. The analytics layer in our data services enables accurate, confident payments and verifications. Our added intelligence helps mitigate fraud risk, reduce payment failure and fees, enable onboarding, and maintain compliance.
A True Partner
The open banking wave is just beginning to rise. COVID-19 has only accelerated the shift to digital banking options that offer faster, slicker ways to set up new accounts, move money and make payments. From October 2020 to August 2021 alone, Gen Zers and Millennials doubled their adoption of digital banks as the primary holder of their accounts. Open banking is the backbone behind the innovation and lifestyle options that are driving fintech app growth.
This is where Finicity provides a differentiated experience. As an innovation partner, Finicity’s development team can identify the best tools to suit your unique use case with the transparency and control that consumers demand. If they feel they can easily set up a new account and then pay quickly and safely, they will adopt your platform. The confidence that secure account opening inspires will drive down-funnel conversions and build confidence in your organization.
Visit our demo page to see how Finicity can help you innovate with data today.
Jack Henry & Associates, Inc.® is a leading provider of technology solutions and payment processing services primarily for the financial services industry. Jack Henry announced today that Finicity, Akoya, and Plaid are among the first open banking pioneers to integrate to the Banno Digital Platform using the Banno Digital Toolkit℠. This provides better security, privacy and transparency for the nearly 6 million consumers banking with the Banno Digital Platform by removing screen scraping.
Learn more about Finicity’s partnership with Jack Henry here.
Mastercard’s Jess Turner, EVP New Digital Infrastructure and Fintech, was featured in PYMNTS The Way Payments Are Now Done eBook discussing how account opening needs to follow customer expectations to provide the best experience possible. You can read the full report at PYMNTS, but here’s what she had to say:
As we contend with in-person restrictions, the demand for and use of digital financial services has grown. Mobile banking, account opening or making real-time payments are now not only our first reflex but often a necessity. Mastercard’s 2020 Global State of Pay study found 73% percent of consumers and 67% of small businesses had used mobile banking apps to manage their finances and make payments in the past 12 months, and 53% of consumers said they were using them more now than they had before.
Consumers want flexibility in how they manage their finances, and true financial services innovators are delivering experiences that provide this choice. Opening checking accounts online is increasingly part of a consumer’s normal payments routine, and it is powered by open banking, which has also seen significant acceleration during COVID-19 and is expanding globally. Nearly two-thirds (64%) of the checking accounts opened during the height of the pandemic were submitted either online or on a mobile device with more than eight in ten banking app users reporting the experience was “easier than they thought.” That’s largely due to open banking.
Digital account opening is here to stay, and consumers expect to open an account in seconds. But issues like manual uploads and micro-deposits add delays. Open banking introduces new ways for financial institutions and apps to verify account ownership and authenticate credentials for opening and funding accounts. The balance of risk, compliance and customer experience is delicate – efficiency can’t compromise fraud prevention. Trust is critical in our hyper-connected digital environment and the consumer must be at the center of control, ensuring greater transparency.
That’s why we have a solution that provides secure, lightning-fast account verification. Mastercard’s open banking network is removing friction points in the account setup, onboarding and funding process. Open banking introduces new ways for financial institutions to verify account ownership and authenticate credentials for opening and funding that include account owners, account details, and balances that boost sign-ups and reduce abandonment. The connectivity is also useful when customers have an existing relationship with a financial institution but want to move money or add services. Data services help financial institutions verify account details and balances in milliseconds while moving money accurately and securely.
With the rapid emergence and global expansion of open banking, the money experience will never be the same. At Mastercard, we are redesigning our network to power the future of payments and services. A global open banking network, coupled with our existing multi-rail expertise, empowers our partners to better serve consumers and their changing expectations with digital experiences.
You need to move money, but with that comes risk. How do you know a customer has enough funds available in their account? The answer: balance checks. With balance checks, you can guarantee that a customer has sufficient funds to facilitate confident money movement. And with live balance checks, you can get the most accurate, most up-to-date account information. Let’s dig deeper into how that works.
What Are Balance Checks?
Many payment solutions rely on balance checks to ensure that an account has the funds necessary to make a payment. For card payments, this comes in the form of a network authorization. For ACH transfers, balance checks help mitigate financial risks like payment failures, overdraft fees, and NSF fees, all of which can happen if an account holder tries to move money they don’t have.
Why Implement Balance Checks?
Balance checks deliver visibility into a customer’s bank account balance so payment facilitators can move money confidently and mitigate risk. Implementing balance checks into your workflow can produce benefits like:
- Streamlined payment experiences
- Reduced ACH payment errors
- Higher rate of payment success
- Mitigate money lost due to payment failures
- Better decision-making thanks to more accurate, up-to-date data
- Improved consumer experience with fewer fees and more successful payments
Altogether, balance checks help payment facilitators build better experiences for consumers that in turn yield better business outcomes.
How Finicity Enables Live Balance Checks for Streamlined, Lower-risk Account Funding
As part of our Finicity Pay solution set, we offer several balance check options so that payment facilitators can enhance the payment experience and move money confidently. Some balance checks are cached, meaning that you receive lightning fast account balance data with timestamps. For the greatest accuracy, live balance checks deliver real-time, instant balance information at the moment of the request. This might be ideal for higher value or riskier payments.
Our live balance call delivers real-time balance information (both cleared balance and available balance) complete with time stamps directly from a consumer’s financial institution. And thanks to the speed of our high-quality data connections, you can get that important balance information in seconds.
For use cases that may not require a live balance check, we also offer balance checks that occur throughout the day at regular intervals so you can retrieve lightning fast results.
These balance check solutions rely on our open banking platform, which is founded on secure data connections that ensure a seamless, low-friction experience, and consumers permissioning their data for their use. At Finicity, we empower the consumer to benefit from their financial data. That means they remain in control of their data and get a trustworthy experience.
Live balance checks aren’t the only payment-experience-improving solutions that Finicity offers. To complement live balance checks, our Finicity Pay solution set also enables you to verify:
- Account and routing number
- Account owner and address
Live balance checks are the key to more successful, more confident money movement. To see Finicity’s instant balance insights in action, request a demo today.
Navy Federal Credit Union’s VP of omni-channel strategy and innovation Ryan Fairley discusses APIs, personal data and how open banking benefits members so they can control their personal information, manage how its accessed by external parties like third-party apps, and receive more transparency into the data sharing and open banking process.
Navy Federal recently signed its first data sharing agreement with open banking platform provider, Finicity, a Mastercard® company. This allows Navy Federal customers to securely link their accounts to applications that use Finicity’s open banking platform.
You can read the full post Putting you in control of your personal data with a new API on the Navy Federal site.
Whether your company uses direct deposit or other direct payments through the ACH network, you’re likely leveraging WEB debit transfers in some way. And if you’re using WEB debits, you should be adhering to Nacha’s WEB debit rule. Doing so will not only keep you on good terms with Nacha, but it’s also an opportunity to enhance payment experiences and protect your company. Here’s how.
How Prevalent Is ACH Fraud?
Nacha’s WEB (meaning internet-initiated entry) debit compliance rules are designed to protect both the ACH network and your company from rising ACH fraud. The Association of Finance Professionals (AFP) 2020 Payments Fraud and Control Survey Report found that 81% of businesses were targets of payments fraud and 55% of businesses were directly impacted by ACH fraud, with 33% of that fraud from ACH debits and 22% from ACH credits.
Fraud usually occurs when a criminal accesses a customer’s account and submits an unauthorized ACH transaction. In the past, all a criminal needed was an account number and a bank routing number. How many abandoned checkbooks might be floating around in the landfill, waiting for an eager fraudster?
With a third of businesses falling victim to ACH WEB debit fraud, it’s no wonder Nacha is updating its rules to protect both the ACH network and your company.
What Are the Nacha WEB Debit Compliance Rules?
Nacha has established operating rules that keep the ACH network secure. As part of those operating rules, originators of WEB debit entries must use a “commercially reasonable fraudulent transaction detection system” to screen those debit transactions for fraud. What that detection system specifically looks like has been largely up to the businesses initiating ACH transfers.
However, Nacha has recently augmented this requirement and now specifically requires that the “fraudulent transaction detection system” includes account validation. Under the new rule, an account must be validated with the first use of the account number, or after any changes to the account number. This updated rule aims to cut down on the WEB debit fraud that continues to climb.
When Do Businesses Need to Be in Compliance?
Nacha had originally set January 1, 2020, as the effective date for the new WEB debit rule. The Board of Directors then approved an extension to March 19, 2021 to allow businesses to educate themselves and implement the new processes. As of now, the WEB debit rule is in effect. Originators of WEB debit payments have one year from the effective date of the rule to implement an account validation solution.
How Can You Ensure Your Payments Are Compliant?
To be compliant with Nacha’s WEB debit rule, your payment solution must include some form of account validation. This validation can take several Nacha-approved forms:
- Prenotification entry: The payment originator sends a zero-dollar entry through the ACH network to the account several days prior to the live entry.
- Micro-deposit verification: Small amounts—usually between a couple cents and a dollar—are sent to an account and must be verified by the account holder.
- Instant account validation: The customer provides consent to access their account information, ideally through a direct API connection to the customer’s financial institution. Of these verification methods, instant account validation delivers the most accurate information in real time and doesn’t rely on the customer manually keying their account and routing information. They simply log in to their account and provide consent for the validation.
Nacha also notes that companies may leverage other validation means. For example, proving that an account has a reliable history of prior successful payments may act as a sufficient validation. Ultimately, Nacha recognizes that every company’s position and situation is unique, and so determining whether an account validation method is “commercially reasonable” will differ, and each company should consult their own attorneys, risk department, or other advisors to ensure the validation method is compliant.
How Finicity’s Instant Account Verification Prevents Fraud and Enables A Better User Experience
Through our Finicity Pay™ solution set, we offer instant account validation that satisfies Nacha’s updated WEB debit rule and provides additional valuable data to improve the experience and efficiency of ACH payments. Our instant account validation enables money movers to mitigate fraud and maximize the accuracy of payment transactions by providing account and routing numbers, account owner verification, and balance checks to streamline and secure ACH payments. And with easy and fast consumer permissioning, our validation solution empowers consumers to benefit from their own data to have better financial services experiences.
In addition to validating account information, the consumer-permissioned data Fincity’s open banking platform provides can be used to check balances prior to processing payments to avoid fees and returns due to insufficient funds. It can also support Know Your Customer (KYC) by providing the name and address of the account owner on file at the financial institution. While this data is useful for payments, it can also be leveraged in account opening, digital wallet or prepaid card funding, or other use cases where similar information is needed.
Don’t just take our word for it. Nacha has named Finicity a Preferred Partner, which guarantees that our validation solution aligns with Nacha’s core strategies to advance the ACH networks. According to Nacha, those who are preferred partners:
- Facilitate efficiencies in the use of ACH information and messaging formats and standards
- Improve ACH risk management and transaction quality that is conducive to ongoing innovation in the ACH network
- Conduct business according to the highest standards
Nacha’s WEB debit rule protects you and ensures better ACH payment experiences. And with Finicity’s instant validation solution, you’ll also empower your customers and get access to the highest-quality real-time data. To see our instant account validation in action, request a demo today.