1. ACH 101 Perspectives from a Processor and a Merchant
Charles Williams, VP Product - First Data
Nonie Meyer, Director Development Operations - WETA

2. ACH 101 Overview Processor perspective Merchant perspective
What is ACH
Why ACH
Selecting a processor
Industry buzz
Merchant perspective
Starting an ACH program
Database considerations
Program maintenance

3. Processor View Point What is ACH Why ACH
Overview
The Participants
Why ACH
Cost Advantages
Ubiquity of the Bank Account
Payment type ‘On File’
Selecting a Third Party Processor
Are Your Use Cases Supported?
NACHA Certification
Industry buzz
Same Day ACH
Real Time Payments

4. What is ACH
The Automated Clearing House Network moves money and information from one bank account to another through ACH transactions
Batch-oriented network
Credits and debits
Alternative to paper checks
One-time and recurring payments
Supports government, consumer, business, and international payments plus payment-related information
Used by more then 11,000 financial institutions
Overseen by NACHA (National Automated Clearing House Association)
Source: NACHA

5. Third-Party Processor
The Participants
ACH Operator
ACH Participants
Definition / Role
Originator
Has the agreement or authorization from the Receiver and initiates the ACH transaction
ODFI
Originating Depository Financial Institution receives the instructions from the Originator and sends to the ACH Operator
ACH Operator
Federal Reserve and/or The Clearing House receive and distribute ACH entries
RDFI
Receiving Depository Financial Institution receives ACH entries and posts to Receivers account
Receiver
Authorized the Originator to initiate an ACH transaction (debit or credit)
Third-Party Processor
Performs functions on behalf of an Originator, ODFI or RDFI (optional)
ODFI
RDFI
Third-Party Processor
Optional
Originator
Authorization
Receiver

6. ACH and Participant Examples
Federal
Reserve
The Clearing House
ACH Operators
ODFIs and RDFIs
Third-Party Processor Bank
Biller’s Bank
Merchant’s
Bank
Merchant’s Bank
Company’s Bank
Customer’s Credit Union
Third-Party Processors
Payment
Processor
B2B
Processor
Payroll
Processor
Originators & Receivers
Merchants
P2P Provider
Employees
Consumers
Tax Payers
Employers
Banks and Credit Unions
Insurance Company
Billers

7. Huge growth in ‘Card On File’ payment growth
Why ACH?
Online card acceptance cost can range from 2% to 3%+
Cost Advantage
No interchange
Cost of accepting or sending checks
Ubiquity
Support most consumers, including the card-less
Float still attracts consumers
Bank accounts are more sticky
On File
If your supporting Card on File, why not add ACH on File?
Eliminate CNP interchange and can be guaranteed by processor
Of 245M adults in the US, 230M of them are in a household with a bank account
(US Census and FDIC-2015)
A study of a major retailers payment volume showed a decrease in Debit and increase in Check/ACH transactions on Wednesday
(TeleCheck)
Huge growth in ‘Card On File’ payment growth

8. Selecting a Third-Party Processor
Industry
Use Case
NACHA SEC Code
Payroll
Marketplace Seller Fantasy Sports
Sending funds to a Receiver
PPD credit
Bill Payment
Non-Profit
Over the phone
Authorized online
Authorized in person
TEL
WEB
PPD debit
Retail Online
Retail In Store
Paper check conversion
Mobile wallet
POP
POS
P2P
Digital wallet
Web debit
Web credit
Know your use case
Common Payments
Recurring
Online
Over the phone
In person
Payroll and Disbursements
NACHA Certification
New in 2017
Third-Party Sender certification

9. Industry Buzz – Same Day ACH
Virtually all transactions, including credits and debits, will be eligible for same-day processing
Phased rollout
Credits – Sept 23, 2016
Debits – Sept 15, 2017
5:00 PM Credit Funds Availability – March 16, 2018
Key points
Max amount $25,000
RDFIs can charge ODFIs 5.2 cents per item
No aggregation of transactions
New ACH processing window
10:30 AM ET and 2:45 PM ET
Payroll
Bill Payments
Invoice Payments
Account Transfers
Ideal Use Cases

10. Industry Buzz – Faster Payments
Faster Payments Task Force
Federal Reserve created Task Force in January of 2015.
Included 300+ participants including NACHA, Processors, Businesses, Card Networks, and Start Ups
Objective – near real-time, irrevocable, ubiquitous payments
Will publish opinion in Mid 2017 with target solutions live and ubiquitous by 2020
The Clearing House
Bank owned payment association. (20+ banks)
Launched their own faster payments effort in October 2014, piloting 1Q17
Zelle
Bank-owned consortium that formed when Early Warning merged with clearXchange in 2016
Initial focus on P2P and C2B
Source: 1) The Global Adoption of Real-Time Retail Payments Systems “, Swift, 2015.”

11. Merchant View Point Starting an ACH Program
NACHA Requirements
Channels to accept ACH
Authorizations
Benefits of ACH
Customer Database Considerations
Storing live data or tokens
Data entry
Billing
Integrations
Reconciliation
Program Maintenance
Tracking failed and returned payments
Ongoing communications with customers
Changes and cancelations

12. Starting an ACH Program
NACHA Requirements
Each channel has specific guidelines for data collection, authorizations and storage
Phone calls recorded and retained
Paperwork through mail retained
Online
Evidence of Authorization must be retained for 24 months after the end of the last payment
Channels to accept ACH
Review your entire program, mail, web, inbound phone, telemarketing etc.
Decide which channels are feasible to accept ACH

13. Starting an ACH Program
Authorizations
A written authorization is required for all recurring ACH payment plans.
Must include specific language and information

14. Starting an ACH Program
Benefits of ACH
No interchange fees
Lower administrative cost
Most stable form of payment
No need to update each time a card is replaced
Most Secure
Drastically reduce stop/loss
Processing ACH is 1/5 to 1/20 the cost of processing credit cards

15. Customer Database Considerations
Storing ACH Data
ACH information must be stored electronically in order to process payments
Stored as a token in your database
Stored as live data in your database
Stored directly inside a payment processor or bank

16. Customer Database Considerations
Data Entry
Routing and Account numbers must be correct
Deposit slips have different routing numbers
Applications list routing and checking account information
Voided checks are best
Educating customers and staff on how to read a check

17. Customer Database Considerations
Billing/Settlement
Look at your business needs and make sure the capabilities match
Frequency options – daily, monthly, weekly
Is it automated or is manual intervention needed?
How to cancel/change?
Lead time required
Customer ability to make changes
Are partial payments an option if needed?
Reconciliation
Most businesses reconcile daily, ensuring each database and processor balance to the penny
If you bill more frequently than your processor deposits, balancing is more challenging

18. Customer Database Considerations
Integrations
Multiple databases or processors
Many businesses require two or more databases due to the needs of various streams of business
Do all of these databases use the same processor
Does all the information feed into one main database of record
Is there an API to connect the databases
Is all the information you need accessible in the API
Do employees have to spend time duplicating work in more than one place
Information should automatically move from the processor to the database
Settlement date
Failures, returns and the reason codes

19. Program Maintenance Tracking failed and returned payments
It is crucial to know when and why payments are unsuccessful
Insufficient funds - try the payment again
Many Processors and Databases do this automatically
Bad data – reference a voided check for an update
Closed account or stop payment - reach out to the customer
Ongoing communication with customers
Informing of payment interruption
Asking customers for a change
Moving from CC to ACH
Increasing monthly amount or changing to a new level of service

20. Program Maintenance Changes and cancelations
Currently on CC and want to change to ACH
Already on ACH, changing amount
Stopping at future date
Stopping immediately
Every change requires a new authorization
New to ACH
New Dollar amount

21. Today’s Speakers Charles Williams, VP Product – First Data
Nonie Meyer, Director Development Operations - WETA
If you have any questions about the presentation, go to our LinkedIn Group (the Payments Education Forum) and request an invitation (this is a closed group specifically for the payments industry)