Mobile ACH payment options require security

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Mobile ACH payments are all around us. Whether purchasing food at a food truck or sending cash using a popular mobile payment app, individuals use the ACH network in some capacity - the size of which spans across the U.S. and processes 30 billion payments each year. While mobile payment options only encompass a portion of electronic transfers made through the network, they must still follow strict security guidelines to avoid the growing risk of fraud. 

Over the past decade, ACH Fraud has become a mainstream issue that all financial institutions must consider when mitigating their risk. Although trends show a slight decrease from 2021 to 2022, the Federal Trade Commission determined that ACH represents the largest dollar loss in the U.S. in 2021 and 2022 by a significant margin. This especially applies to mobile payments, which are located in the pockets of every consumer nationwide. 

Continue reading and learn more about the risks associated with mobile ACH payments, what key regulations are currently in place to safeguard financial data, and the steps businesses must take to avoid getting pinned down with costly fines. 

What is a Mobile ACH Payment?

First and foremost, it's important to understand that the Automated Clearing House (ACH) network facilitates seamless and secure electronic payments - last year alone, over $72 trillion was transferred through the network. Governing the ACH and the method these transactions take place are the rules and regulations set forth by Nacha. 

The primary difference between a regular and mobile ACH payment is that the electronic transfer occurs on a mobile device as the payment initiation method. This difference may seem minute, but it still plays a significant role in how users keep data safe. Whether the business is using a third-party app or one they developed, they are still responsible for upholding the rules set out by Nacha. 

What Nacha Rules Need to be Followed

The appeal of mobile ACH apps' is massively due to convenience, but that same advantage makes it vulnerable (it's hard for a desktop computer to fall out of a pocket). To address this additional concern, two sections of rules must be followed. The first will address the fraud regulations and security measures set out by Nacha for any ACH electronic transfer, and the second will cover important information specifically for mobile transactions. 

General ACH Regulations and Best Practices

  • Authorization Requirements: Financial institutions and businesses must obtain proper authorization from customers or account holders before initiating ACH transactions. This authorization can be in written agreements, electronic consent, or recorded voice authorizations.
  • Authentication: Strong authentication methods are recommended to verify the identity of the sender and receiver of ACH transactions. This may include multifactor authentication (MFA), such as a combination of passwords, PINs, and biometric verification.
  • ACH Risk Management: Financial institutions must implement comprehensive programs to identify, assess, and mitigate ACH fraud risks. This may involve monitoring transactions for unusual activity and promptly addressing any suspicious transactions.
  • Notification of Unauthorized Transactions: Financial institutions are required to notify their customers promptly when unauthorized ACH transactions are detected.
  • ACH Originator Verification: Financial institutions should verify the legitimacy of ACH originators (companies or individuals initiating ACH transactions) to prevent fraudulent or unauthorized transactions.

Additional Mobile Tips

  • Two-Factor Authentication: Ensure all devices storing financial information have two-factor authentication. This usually combines fingerprint/facial recognition and a PIN number. 
  • Downloading Dangerous Apps: Constantly look for apps that could put the mobile device at risk. The FBI reported losses exceeding $4.2 billion in internet crime in 2020, with phishing scams and apps being the top ones individuals and businesses suffer.
  • Weak Passwords: Being hacked due to ineffective or overused passwords is one of the oldest forms of hacking. Continue updating old passwords each month and ensure they pass the strength test. 
  • Using Public Wi-Fi: It might seem appealing to use Starbucks' free Wi-Fi, but it may create the perfect backdoor for hackers to steal information. Fake connections are created by setting up an access point (AP), which can be done using any device with internet access with the same name as a legitimate connection. Hackers then intercept any data in transit, such as a bank transfer or online payment. 
  • Human Error: Losing a phone or providing information unknowingly is responsible for a large part of data breaches. Keeping devices out of the hands of fraudsters starts with the user being vigilant. 

Following these rules will decrease the risk of fraud, but they should not be the only steps taken. Ensure you are entirely in compliance and review Nacha's ACH Security Framework. 

How We Make ACH Compliance Easier

Mobile ACH transactions have transformed how businesses and individuals carry out financial transactions. However, no matter the device, compliance with Nacha rules is not only a legal obligation but also an essential step in establishing credibility, ensuring security, and facilitating effective economic interactions.

With MicroBilt's suite of robust alternative credit data and risk management products, we can help your business lend smarter, collect quicker, and grow the safe way. Test our APIs today and start navigating the ACH network with confidence.