When speaking with our members, many have positive pay products for checks attempting to post and settle to a non-consumer’s account, but what about positive pay systems for received ACH debit payments meant for non-consumer accounts? There has been a growing demand by financial institutions to seek this service and an increasing amount of online banking vendors offering the service.
Personally, I’ve spent years reviewing different solutions and have seen many offerings by various third-party service providers as well as core systems. For the most part, they operate the same way by prompting reviews of items based on company IDs, amounts and/or types of standard entry class (SEC) codes. From these three fields, the account holder can create review settings in their online banking system which would host the ACH positive pay system. Financial institutions usually have a back-office version of their ACH positive pay system, should they have any need to assist with the reviews and processing of items.
Most systems have two types of settings that would prompt reviews or automatic posting/returns of items:
- Filters: company IDs and other payments settings your account holder chooses to allow to automatically post. All other payments contrary to the list would reject as exceptions to review.
- Blocks: company IDs and other payments settings your account holder wants to block to either create as exceptions or automatically return. All other payments contrary to the list would automatically post.
Based on my experience, it’s best to not comingle filters and blocks because they can contradict each other. Utilizing filters seems to work best, as it also forces the account holder to be aware of their own payments. Blocks work best for any account holder who wants no ACH debits to post whatsoever.
Having an agreed-upon default action is a must, whether end-of-the-day unworked items automatically post or are returned. Most applications that I witnessed or used had “return” as the default action. Speaking of the return, most ACH positive pay systems returned everything as R29 – Corporate Customer Advises Not Authorized. Just be aware of that, should your account holder accidentally flag a valid payment to be returned.
If you’re already offering check positive pay, consider creating a similar agreement or a combined agreement that has ACH-specific items such as cutoff times, default action, indemnifying the financial institution from a return action, their responsibility to add filters/blocks, etc. identified. Also, make sure your ACH positive pay solution is timely delivering any R29 returns to the adequate core or ACH system that acts as a sending point. Otherwise, you’ll have an untimely return issue with the ODFI.
One thing that I did not encounter from any ACH positive pay systems I reviewed was a system that blocked ACH credits. Blocks and filters were for ACH debits only, so you may want to review core system settings regarding ACH credits. But be aware that many cores are “all or nothing”.
I hope sharing my previous experience is helpful as you embark on your own ACH positive pay journey. If you’d like guidance from experts on your journey to implement ACH positive pay or any new product at your financial institution, reach out to our team of experts at advisoryservices@epcor.org. We would love to help you along the way!