Two-thirds of high-risk bank transactions end in returns, study shows

By Gloria Methri

As Automated Clearing House (ACH) transactions soar, a startling revelation has emerged: two-thirds of high-risk bank transactions end in returns. This statistic is part of ValidiFI, Inc.’s latest quarterly report, which highlights the complexities of bank account validation and its critical role in navigating ACH compliance with Nacha.

With businesses increasingly adopting pay-by-bank applications, the need for robust validation strategies has never been more urgent.

The Urgency of Bank Account Validation

The report highlights the pressing challenges organisations face when dealing with high-risk accounts. According to their findings, these accounts experience 11.5 times more ACH returns than low-risk accounts. Subsequent payments from high-risk accounts yield a mere 14% success rate, creating operational hurdles for companies trying to mitigate fraud and enhance transaction efficiency.

John Gordon, CEO of ValidiFI, emphasised the necessity of sound validation practices, saying, “By leveraging bank and payment data to identify high-risk accounts, organisations can tailor their workflows to reduce failed transactions and improve overall payment operations.” This approach not only aids in compliance but also fosters a better customer experience.

Understanding the Risk Landscape

The report breaks down the risks associated with different account categories:

• High-Risk Accounts: A staggering two-thirds of transactions from these accounts result in returns, underscoring the critical need for validation.

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  NSF Risk: Accounts at risk of non-sufficient funds (NSF) present 2 NSFs for every successful transaction, amplifying the risk burden for businesses.

• Low-Risk Accounts: Conversely, low-risk accounts demonstrate a 97% success rate. They allow organisations to streamline their processes and auto-approve transactions, leading to substantial cost and time savings.

A Path Forward

ValidiFI’s insights provide a roadmap for organisations navigating the complexities of ACH payments. The emphasis on rigorous account validation helps businesses not only comply with regulatory requirements but also effectively manage payment risks.

For those engaging in ACH transactions, understanding the dynamics of high-risk and low-risk accounts is crucial. The report shows that choosing the right validation strategy can significantly reduce friction and enhance financial outcomes.