In 2023, the ACH Network added more than a billion and a half new payments, a year-over-year growth rate of 4.8%. With the economy doing reasonably well, employment levels being high, and payments continuing to migrate away from paper checks and cash, ACH is not just growing robustly but also poised to continue that growth well into the future. 

We asked Mike Herd, Executive Vice President of ACH Network Administration at Nacha, about what’s fueling that growth and where he expects ACH to be headed. Herd discussed these issues with Elisa Tavilla, Director of Debit Payments at Javelin Strategy & Research, in a recent PaymentsJournal podcast.

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ACH by the Numbers

The ACH Network handled 31.5 billion payments last year and moved more than $80 trillion. Of that growth, Same Day ACH volume increased by more than 22% in 2023. Notable drivers of overall ACH expansion included:  

* The number of consumer internet-initiated payments rose by 5.7% to 9.9 billion, primarily supporting bill payment and account transfer use cases.  

* The number of healthcare claim payments to medical and dental providers rose by 7.7% to 488 million.   

* Direct Deposit volume increased by 3.3%, with 8.3 billion payments to workers.    

The dollar limit of a Same Day ACH payment increased in 2022 to $1 million, which has had an effect in the marketplace. “We have been seeing results from it continue through the present with increases in transactions and increases in dollar flows,” Herd said. “Since Same Day ACH started in 2016, we’ve now surpassed 3 billion payments, moving more than $6 trillion. Among the leaders in that growth are things like business-to-business payments and consumer-initiated debt—transferring funds, paying bills [and] loading wallets.”  

Herd said that the increase in Same Day ACH usage has been largely through payroll and other types of disbursements to workers and consumers. That might be a missed payroll, or paying shift or gig workers, for whom speed of payment is an important consideration. Or it might be something like an insurance payout, another instance where speed is an important factor.  

The pandemic was another factor that led to more ACH payments. “During the COVID era, we saw a pretty dramatic shift, impacting businesses that didn’t have staff present in person to issue or process checks,” Herd said. “That was a catalyzing event from a behavioral perspective,

No one, from merchants to processors to customers, likes handling disputed payments. Visa Compelling Evidence 3.0 (CE 3.0) intends to reduce these pain points. It provides a standardized framework for all parties involved in the chargeback process, enabling merchants to substantiate claims by sharing real-time information and preventing disputes.

The latest update to CE 3.0 brought a new round of concerns from acquiring entities. PaymentsJournal turned to Carol Palmer, Head of Risk & Compliance Operations at Ubiquity, and Daniel Keyes, Senior Analyst for Merchant Services at Javelin Strategy & Research, for a deep dive into the introduction of CE 3.0.

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The Road to CE 3.0

CE 3.0 streamlines and expedites the resolution process for unauthorized disputes, focusing on addressing instances of friendly fraud or first-party fraud. In a collaborative effort, Visa worked closely with merchants and issuers to formulate this comprehensive rule change.  

Visa conducted a thorough analysis of the specific requirements for merchants to confirm a cardholder’s previous participation and identify the essential resources for notifying when a transaction is mistakenly labeled as fraudulent. The rule adjustment empowers small businesses by enabling them to present more robust evidence in such cases. The goal is to empower merchants to avoid or minimize unjust chargebacks, creating a fairer and more efficient system for all parties. 

“CE 3.0 delivers substantial advantages to merchants, ushering in a transformative shift,” Palmer said. “However, it’s important to note that issuers are still grappling with the challenges associated with billing errors and the burden of proof. Despite this, CE 3.0 introduces a significant improvement by meticulously examining personal data and seamlessly sharing it with the cardholder, mirroring the efficiency of CB processing.” 

Keyes agreed that the benefits outweigh the negatives. “CE 3.0 puts more liability and responsibility on issuers,” he said. “But there are also more tools and a process they can use to handle that effectively and have this ultimately come out as a positive experience.”

The CE 3.0 methodology aligns with Rapid Dispute Resolution (RDR) and order insight. Through RDR, issuers get the benefit of transaction retrieval without incurring the typical chargeback costs. This eases concerns over blocked chargebacks and enables issuers to present data from order insight as compelling sup...

Faster and larger transaction flows have transformed the financial space into a lucrative superhighway, where bad actors can sweep in undetected and make off with substantial and ill-gotten gains.

Among the most exploited gateways for fraudsters are account-to-account (A2A) and peer-to-peer (P2P) payment systems. The increasing popularity of these methods for repaying friends, making purchases, or splitting bills has created an opportune environment for malicious activities. As more consumers opt for the convenience of these payment channels over traditional methods like credit cards or cash, bad actors are ready to seize the moment and strike.

The tolls of these attacks are not just financial; the damage extends to the trust and security of consumers. Recent data from the Federal Trade Commission revealed that consumers lost nearly $8.8 billion to scams in 2022, an increase of 30% from the previous year.

Kerry Thomas, Senior Vice President of Fraud and Decisioning Products at Mastercard, and Kevin Libby, Analyst of Fraud & Security at Javelin Strategy & Research, explored this topic during a recent PaymentsJournal podcast. They discussed the contributing factors that have fueled an increase in fraud attacks, why A2A and P2P fraud is rising, and what consumers and FIs can do to protect themselves.

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What’s Contributing to the Rise in Fraud Attacks

Fraudsters are implementing manipulative tactics that aim to attack consumers at their most vulnerable points, particularly around peak shopping days like the holidays. Fraudsters are leveraging various channels, including email, and pretending to be a family member or friend in need of financial help.

Some are even fabricating fake charities, aiming to attract consumers and solicit donations for organizations that don’t exist.

“With the heightened transaction flows of the holiday season, it becomes this breeding ground for fraudsters to really start to take advantage. And what they’re really playing on is the emotion of the consumers,” Thomas said.

“We’ve also moved from a different form of victim fraud, where it used to be, I steal information via online channels or dark web to, ‘No, I’m going to get you to give me the information and I’m going to do that through manipulation,

With consumers’ growing demand for instant payments, convenience, and immediacy, instant issuance just makes sense. Providing a personalized, on-demand, active debit and credit card that promotes top-of-wallet use as well as boosts security—instead of making consumers wait for their card to arrive in the mail—can be a game-changer. By offering this service, financial institutions are doing more to potentially help solidify a long-term relationship with their customers.

In a recent PaymentsJournal podcast, Rob Dixon, VP of Digital and Business Development at CPI, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, discuss what instant issuance is, why financial institutions should offer it, and why offering more sustainable options for customers is a forward-looking, strategic move.

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What is Instant Issuance?

Instant issuance programs can help financial institutions gain a competitive edge, giving their customers instant access to their card of choice, thereby reducing incidences of lost cards and promoting increased spending. But what is instant issuance?

Dixon explains:

“Instant issuance really is the ability for a cardholder to walk into a branch or another facility and walk out with a fully capable card, being able to transact anywhere that the cardholder wants to.”

And it’s not just any run-of-the-mill card that these FIs are offering via instant issuance. Dixon said that many of the current instant issuance programs provide EMV or dual interface contactless cards, as well as a multitude of substrates (recycled plastic cards, traditional PVC, and some wood cards).

But as Riley points out, having an instant issuance program is more than just getting a card on demand.

“That card really reinforces the brand,” Riley said. “Getting into instant issuance is important because you’re really at the height of the relationship.

“This is your core contact with the customer, whether they’re opening an account of one sort or another. Having the ability to get that (card) right away really keeps the momentum of that relationship going.”

Why FIs Should Offer Instant Issuance

When FIs eliminate the lag time between issuance and the  customer’s receipt and activation of their card, the customer is more likely to use the card sooner and more often.

Financial institutions are increasingly navigating a sea of scams and fraud. With the evolution of emerging technologies, new avenues for attack have opened, leaving banks, credit unions, and their accountholders more vulnerable.

As peer-to-peer (P2P) payments become an expectation, the risks for banks and credit unions edge higher. The real-time nature of P2P payments and the “relationship” between the scammer and the victim, makes it exceedingly difficult for banks to detect and mitigate P2P scams.

In a recent PaymentsJournal podcast, Kannan Srinivasan, Vice President of Risk Management at Fiserv, and Brian Riley, Director of Credit and Co-Head of Payments at Javelin Strategy & Research, explored the key differences between scams and fraud, the prevalence of P2P scams versus other types of scams, and the best approach for financial institutions to implementing P2P payments.

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Differentiating Between Scams and Fraud

Incidences of scams and fraud have gained traction in recent years, and it’s easy to use these terms interchangeably to describe any type of financial wrongdoing by criminals. But there’s a distinction. The proper classification of these types of fraud can aid in developing the countermeasures to address them.

Fraud can be divided into three types: first-party, second-party, and third-party.

“First-party fraud is when the crime is committed by the owner of the account,” Riley said. “It might be a bad return, it might be a claim of non-service on a merchant, something along that line. And then you have second-party fraud, where fraud is committed by another person and there’s a relationship that the owner of the account has with the other person. It might be allowing them to use the card or something along that line.”

“But third-party fraud is really one of the most common when it comes to payments, and that’s when there’s another party that’s unrelated to the account using it in one form or another,” he said.

Within third-party fraud is a deeper classification where the act can be readily identified as a fraud or a scam. An act of fraud normally involves the illicit use of another person’s information, such as in identify theft and credit card fraud.

With scams, the focus is on deceiving victims into giving up their money or their personal information, which can occur in P2P payments like those driven by romance scams and phishing emails.

Payment processing is much more seamless now than it was even a few years ago. The pandemic accelerated the pace of digitizing payments, and peer-to-peer payment networks continue to grow in popularity. But this has also meant that consumers and banks have faced a growing number of innovative payments scams. 

 In a recent PaymentsJournal podcast, Sudhir Jha, Executive Vice President and Head of Brighterion, a Mastercard company, and Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, discussed how generative AI is changing the payments fraud landscape and what we should expect in  the year ahead

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Leaving Information on the Table

Social media has changed many things about payments, starting with the fact that they can now be facilitated directly from an app like Facebook. That has opened up new avenues that institutions need to keep a careful eye on. On top of this, consumers have become more comfortable with leaving information in the open on various social apps. Many financial institutions have been facing more challenges when it comes to intervening or detecting fraudulent or suspicious activity through these channels. 

Social media adds several new wrinkles to fighting fraud. “If you go to a restaurant and post your food before you eat, that gives a fraudster a ton of information about you to make their fraud attempts much more believable and effective,” Jha said. “The potential criminal not only knows the location, then they know which business you interacted with, and even what you ate.”

With all this information, a fraudster can easily create a believable approach to the customer: “You ate at my restaurant yesterday and you paid X dollars, but that was incorrect. To get your refund, click on this link.” That link can be part of a phishing attempt. By collecting all that personal information, the criminal can even become friendly with the target and create a bond that sets up a later scam.

While scams have always been around, AI makes such approaches more scalable. It used to be much harder for bad actors to collect enough information to personalize attacks. Now all of that can be automated using AI. To counter these attempts, businesses need to embrace sophisticated solutions. Checking a few touchpoints and asking a couple of questions will not be enough to fight the scams of today.

“We’ve talked a lot about regulation and halting advancements in AI, which sounds wonderful in theory,

The Consumer Financial Protection Bureau (CFPB) proposed a rule in October that requires non-depository and depository entities to release certain types of data related to customer accounts and transactions to consumers and third parties.

As a result, larger financial institutions will need to adhere to the compliance regulations earlier than their smaller counterparts. Initially, community banks and credit unions lacking digital interfaces will be exempted. Advocates of this regulation argue that it will provide consumers with more control over their financial information, enabling them to make more informed financial decisions. Overall, this initiative is expected to foster competition within the financial services sector.

Kevin Hughes, Director of Aggregation Solutions at Fiserv, and Matthew Gaughan, Analyst of Emerging Payments at Javelin Strategy & Research, delved into this proposed rule during a recent PaymentsJournal podcast. They discussed some of the highlights of the CFPB proposed 1033 update and its impact on banks and credit unions.

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Highlights of the CFPB Proposed 1033 Update

Known as the Required Rulemaking on Personal Financial Data Rights, the CFPB proposed 1033 update enables consumers to access and download their financial transaction data and other information from credit unions and banks.

With their consent, consumers can share their data with authorized third-party apps and services. In this data exchange, organizations are required to disclose the methods by which they collect, use, and share consumer data. The most important elements of this suggested rule revolve around ensuring security and establishing standardization.

“A part of this proposed rule is that banks and credit unions will have more visibility into what their customers are doing and who they’re sharing data with,” Hughes said. “It’s about being able to control the scope of data for aggregators in this community.”

According to Gaughan, the CFPB is providing standardization, which is needed. “These rule changes will bring consistency to the industry and make it easier for banks across the board to utilize some of these different data solutions and not rely on some of those less secure options like screen scraping,” he said.

How the Rule Could Affect Banks and Credit Unions

Disbursing funds in an efficient and accessible way is critical to a good customer experience. But new economic realities and mobile adoption have challenged organizations to evolve how they pay to meet consumer demands.

In a recent PaymentsJournal podcast, two experts from Blackhawk Network, Sarah Kositzke, Director of Research, and Scott Lapp, Director of Product Marketing and Incentives, along with Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the latest research on consumer payments preferences. The conversation focused on Blackhawk’s research into business-to-consumer disbursements.   

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Defining the Terms

Disbursements are typically issued when a customer is owed a credit or refund. Examples include a property management company returning a security deposit, or an airline handing out compensation because a flight was canceled. Blackhawk wanted to better understand customers’ payment preferences, specifically in terms of their banking classification —whether unbanked, underbanked, or fully banked.

According to the FDIC1, the fully banked—representing 80% of U.S. households—have established relationships with banks and use them for all types of services. About 5% of U.S. households are unbanked, meaning they do not have any established relationship with a bank. The remaining households are underbanked: They have a checking and/or savings account with a bank but also leverage other nonbank transactions, like those through rent-to-own services, payday loans, pawn shop loans, and tax refund anticipation loans. They are likely to be 34 and under, Black or Hispanic, have a high school education or less, and have a household income of $50,000 or less.  

Strong Feelings About Printed Checks

One of the strongest results from Blackhawk’s research was consumers’ antipathy toward physical checks. Nearly three-quarters of those in unbanked and underbanked households said they were frustrated by receiving a paper check. But nearly half (48%) of the fully banked households are also frustrated by receiving a paper check.   

Much of the frustration around checks is that they are a small but real burden.. “Even to deposit a check via mobile phone, you have to set aside time to do that,” Lapp said. “If you’re not using mobile banking, then you have to find a bank or an ATM. Sometimes the person needs to go to the issuing bank, and if there is no local branch, they may have to go to a check-cashing place, which means paying check-cashing fees.

In the past decade, the payments industry has experienced more change than in the previous 40 years. The number of payment options for consumers is multiplying, and the adoption of real-time payments is soaring.  

While this is an exciting time for the payments industry, financial services companies are facing tough challenges as payment processing requirements become increasingly complex—especially in the back office. In a recent PaymentsJournal podcast, BHMI’s Chief Technology Officer, Michael Meeks, and Director of Software Engineering, Jon Protaskey, along with Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research, spoke about these challenges.

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The Historic Role of the Back Office

Backoffice transactions are largely hidden. After a payment has gone through a front-end system for authorization, the back office takes over and performs several key functions. It settles the transactions among the financial entities involved and reconciles them with various sources, such as front ends and network clearing files. The back office also charges the appropriate fees, handles transaction disputes, supports transaction research, and allows real-time financial positions to be viewed. 

Thirty years ago, when banks were first moving from cash to digital payments and cards, the ecosystem was different. The legacy systems that were built decades ago are just not capable of meeting today’s payment demands. Those systems were written with an isolated perspective and minimal requirements, then added to and pieced together over the years. The gaps in the operation still often require manual processes to be in place. 

At that time, nobody could have projected the transaction volumes seen today. As a result, there was no expectation for real-time processing or real-time data access for decision-making. Everything was handled in batches, and the need to support non-card-based transactions wasn’t even an issue. These historical card-based systems were written to support ISO 8583, not the new standard of ISO 20022—which makes it hard for back office environments to adapt and put the new requirements into their systems. 

“We have seen many organizations quickly upgrade their front-end client interfaces, but they have been a bit slower to upgrade outdated back office systems,” Bodine said.

When it comes to business-to-business (B2B) payments, those funneled through automated clearing house (ACH) rails are increasingly popular.  Although many businesses are still mailing checks as payment, more businesses are seeing the risks and looking toward ACH payments as a cost-efficient and convenient alternative.

During a recent PaymentsJournal podcast, Brian Holbrook, Director of Product Strategy and Integrated Services, LSEG Risk Intelligence, and James Wester, Director of Cryptocurrency and Co-Head of Payments at Javelin Strategy & Research, delved into the current landscape of ACH payments in B2B use cases, the potential impact of Nacha’s proposed amendments on originators, and the challenges and opportunities for originators that are arising from these amendments.

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The Current Landscape

ACH payments have been growing in popularity among businesses making B2B payments. Funds are transferred seamlessly between bank accounts, and settlement times range from one to three days. ACH payments are also fast and more cost-effective than paper checks. As waiting for payment becomes less sustainable in the maintenance of cash flow, B2B use cases will continue to expand.

“So when we look at data coming out of Nacha, we can see that the B2B volume increases across ACH are up nearly 10%,” Holbrook said.

“We’re seeing a significant growth across the originator landscape, seeing multiple increases in different verticals, different industries. And, of course, with those increases come additional risk.

“We see some new rules coming out that are going to have an impact on the whole ecosystem, but particularly on the originator side.”

With the ACH network processing tens of billions of transactions, with thousands of banks in participation, and numerous regulations, the network can be difficult to navigate.

“I think that sometimes it’s a bit of a surprise—just how the infrastructure for ACH transactions, the use of the ACH network, and the need across multiple use cases is growing so very, quickly and so expertise in this space is sometimes hard to come by,” Wester said.

According to Holbrook, Nacha reported that Same Day ACH payments were up 20% in Q3 of 2023 over the same quarter a year ago, a significant jump indeed.