0. Mike Watercott, CTP Vice President Technical Product Consultant
ACH news and views
Mike Watercott, CTP
Vice President
Technical Product Consultant
ACH News and Views
Come hear about new developments, pending initiatives, and recent rule changes that may impact your company's migration from paper to electronic payments. We invite payments professionals and those interested in cost reduction and process improvement to this session where we'll share news and views of the ACH system. See the latest statistics and trends in ACH usage. Explore what's in the works at NACHA, from same-day ACH to healthcare. Learn the best way to handle fraudulent s that appear to come from NACHA. And hear how ACH is going mobile.
Office of the State Controller eCommerce Conference
Raleigh, NC
October 30, 2012

1. Discussion agenda Volume trends Recent developments
Exceptions and error correction

2. ACH volume trends 2

3. For the last three years, ACH growth has been below 5% annually
ACH Volume 2005 – 2011
Billions of Transactions. Includes commercial and government payments
Total Volume includes interbank, direct send, and on-us transactions
Network Volume includes interbank transactions only
Data Source: Wells Fargo and NACHA 3

4. 2011 ACH volume highlights
“Headline” Network growth rate of approximately 3% in 2011
“Native” electronic transactions (non-check conversion entries) increased by over 5%
ARC volume declined over 9%
WEB transactions grew at 9%
There are now more WEB transactions processed than all check conversion transactions combined
CTX transactions – a key indicator of B2B activity – grew by almost 13%

5. Selected SEC Code detail
2009 Volume
2010
Volume
2011
2011 Growth
Accounts Receivable Conversion (ARC)
2,410MM
2,206MM
2,000MM
(9.3%)
Point of Purchase Conversion (POP)
481MM
513MM
493MM
(3.9%)
Back Office Conversion (BOC)
161MM
181MM
195MM
7.9%
Internet Payments (WEB)
2,280MM
2,449MM
2,680MM
9.4%
Telephone Payments (TEL)
344MM
354MM
367MM
3.7%
Direct Deposit (PPD Credits)
4,545MM
4,710MM
4,879MM
3.6%
Direct Payment (PPD Debits)
2,770MM
2,833MM
2,933MM
3.5%
Corporate Credit or Debit (CCD)
1,996MM
2,064MM
2,165MM
4.9%
Corporate Trade Exchange (CTX)
60MM
67MM
76MM
12.7%
Millions of Transactions. Network (interbank) volume only
Data Source: Wells Fargo and NACHA 5

6. 2011 Wells Fargo ACH highlights
Total origination volume up 9.1% v. 2010
Nearly 4 billion transactions originated (3.1 billion Network transactions)
20% origination market share
Top ACH Processors 2011
Wells Fargo
4,612MM
JP Morgan
4,238MM
Bank of America
3,638MM
PNC
1,081MM
Citigroup
1,050MM
5.5 billion total txns processed (Network, on us, and Received)
Volume includes interbank originated and received payments
Data Source: Wells Fargo and NACHA

7. Largest Interbank Originators Largest Interbank Receivers
2011 NACHA ACH rankings
Largest Interbank Originators
Volume (MM)
YOY Change 1
J.P. Morgan Chase
3,189
0.5% 2
Wells Fargo
3,140
3.7% 3
Bank of America
2,033
5.1% 4
Citigroup
835
6.0% 5
U.S. Bancorp
619
5.7%
Largest Interbank Receivers
Volume (MM)
YOY Change 1
Bank of America
1,605
4.8% 2
Wells Fargo
1,472
0.8% 3
J. P. Morgan Chase
1,049
6.2% 4
PNC Financial Services Group
463
4.4% 5
U.S. Bancorp
429
6.6%
Data Source: NACHA 7

8. Recent developments 8

9. Same-day ACH – update FedACH Same Day Service
Federal Reserve service launched in August, 2010
Service limited to some consumer debits; optional participation by financial institutions
Minimal bank participation, to date
18 banks/30 Routing-Transit Numbers
Approx 30 R/Ts; 18 FIs
Bank of Oklahoma larges participating bank 9

10. Same-day ACH – update
NACHA Expedited Processing and Settlement (EPS)
Developed a Rules framework for a mandatory same-day ACH settlement capability
All ACH transactions would be eligible (except IAT)
Unique identifier for same-day transactions
In by 2:00 p.m. ET/out by 3:00 p.m. ET
$25,000 transaction cap
Next-steps:
Formal ballot issued; voting concluded Aug 10th
If passed, implementation in March, 2014
Approx 30 R/Ts; 18 FIs
Bank of Oklahoma larges participating bank
332 orgs (banks and end users) answered survey questions
FRB
US Treasury (FMS)
AFP 10

11. ACH phishing
Increased incidence of fraudulent s purporting to come from NACHA
Can look legitimate by using authentic NACHA address and IP address
Typically create a sense of urgency by reporting a failed or incomplete transaction
s may contain links to fraudulent websites used to collect personal information or banking credentials
Attachments are often used to deliver/install malware

12. ACH phishing examples From: info@nacha.org
Subject: ACH Transfer Cancelled
The ACH Transaction (ID: ), recently initiated from your checking account (by you or any other person), was cancelled by the other financial institution.
Please click here to view further information
If you have any questions or comments, contact us at Thank you for using
From:
Subject: Pending Payment from CJ Industries
We received a payment request against your account for $1, from CJ Industries.
Transaction Reference Number:
If you made this transaction or authorize its payment, please ignore this .
If you would like to decline this payment, please click on the following link:
Decline transaction # for $1, from CJ Industries

13. ACH phishing – best practices
Any with transaction details purporting to come from NACHA is fraudulent
NACHA does not process ACH transactions
Do not respond to, open attachments, or click on links in any suspicious s
Train employees never to give out online banking credentials
Use the Wells Fargo ACH Fraud Filter service on all accounts

14. ACH Fraud Filter service
Stop option
Automatically returns all ACH debits you do not authorize in advance
Best for accounts with predictable ACH activity
Review option
Allows you to review all ACH debits you do not authorize in advance
Make your pay/return decision by 7:00 p.m., CT the day following the Effective Date

15. ACH Fraud Filter service
Extensive CEO® reporting for unauthorized transactions, preauthorizations, and decisioned items
CEO Event Messaging alerts you when you have exceptions to decision
Use CEO Mobile® to decision items on the go!

16. Exceptions and error correction16

17. Exceptions and error correction
Rejects
Returns/Notifications of Change (NOCs)
Deletes and Reversals
Recalls

18. Rejects
Items rejected by the Wells Fargo ACH system before being released to the ACH Network
Common reject reasons:
Invalid Routing/Transit Number
Invalid Transaction Code
Mandatory data element missing
Information on rejected transactions is available shortly after receiving your ACH file
How are rejects reported to you?
Data transmission file
CEO ACH Origination Report or ACH Customer Activity Report
(available September, 2012)

19. Returns
Items returned by the receiving bank (or ACH Operator) after being released to the ACH Network
Common return reasons:
Non-sufficient funds (item can be redeposited one or two additional times)
Account closed
Unauthorized
Most returns are received within 48 hours of the original settlement date
Some consumer debit returns can be received up to 60 days after the original settlement date

20. Returns
Information on returned items is available by 10:00 a.m., CT each business day
How are returned items reported to you?
Data transmission file
CEO ACH Return Item/NOC Report
Use CEO Event Messaging to notify you of returned item activity
Fax (mid-day)

21. Notifications of Change (NOCs)
Informational transaction sent by the receiving bank
Original transaction posted successfully; requested change must be made before initiating another transaction to that account
Common change codes:
Change Routing/Transit Number (RTN)
Change account number
Change RTN and account number
Most NOCs are received within 48 hours of the original settlement date

22. Notifications of Change (NOCs)
Information on NOCs is available by 10:00 a.m., CT each business day
How are NOCs reported to you?
Data transmission file
CEO ACH Return Item/NOC Report
Fax (mid-day)

23. Deletes and Reversals
Deletes allow you to remove a transaction from your file before your transactions are released to the ACH Network
Credits can be deleted up to 3:00 p.m., CT two business days before your Effective Date or 3:00 p.m., CT the day you deliver your file to us, whichever is later
Debits can be deleted up to 3:00 p.m., CT one business day before your Effective Date or 3:00 p.m., CT the day you deliver your file to us, whichever is later
A separate settlement transaction will post to your account for the amount of your deletes

24. Deletes and Reversals
Once a transaction has been released, you can initiate a Reversal
Reversals can be requested up to 3:00 p.m., CT four business days after the original Settlement Date
If you request a delete and the transaction has already been released, we will automatically initiate a Reversal
A separate settlement transaction will post to your account for the amount of your Reversals
Reversals can be returned; there is no guarantee you will recover the funds (when reversing a credit)

25. Deletes and Reversals Requesting a delete or Reversal Reporting E-Mail
CEO portal – ACH Deletes and Reversals Online service
Fax
Reporting
CEO ACH Customer Activity Report
(available September, 2012)

26. Recalls
Can be requested after the allowable Reversal time period has passed
Manual request from Wells Fargo ACH Operations to the receiving bank requesting the return of the transaction
Typically done for debits
Almost never successful for credits
Some receiving banks will charge Wells Fargo for each item returned
© 2012 Wells Fargo Bank, N.A. All rights reserved. Member FDIC.