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Mar 02

ACH Transfers: What Are the Risks Involved?

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Advancing technology has made it possible for businesses to accept payments and complete transactions efficiently. Modern payment methods are quick, cheap, and secure compared to traditionally lengthy payment processes with hefty fees. This explains why more businesses have turned to ACH payments. Completing approximately $26.8 billion in 2020 sent to various networks, ACH transfers favors several business operations.

Unfortunately, despite the unmatched convenience offered by ACH transfers, it presents several inherent risks. Below are some common ACH transfer risks and how to avoid them.


Common ACH Payments Risks

Despite adhering to all NACHA guidelines, financial institutions and businesses using ACH transfers are exposed to various risks. The risks include:

  • Credit risks – ACH credit risks occur with ACH credit if one party doesn’t make the payments required to settle ACH credit contracts. This commonly occurs when the party is declared bankrupt or incurs a significant financial loss. In such situations, the payment vendor facilitating ACH transactions suffers credit risks.
  • Debit risks – ACH debit risk is commonly used by scammers to manipulate the debit system. Hackers and malicious persons can obtain private information, such as routing numbers or bank account numbers from customers’ accounts and complete unauthorized debit requests from the account. Unlike credit risks, the bank will support businesses or owners of accounts that fall victim to this fraud.
  • Systemic risks – ACH systemic risks closely resemble credit risks. However, they occur when several high-dollar transactions are completed. For instance, if one party doesn’t settle their transactions, others in the system will be affected. Fraud, human error, bankruptcy, and other forms of financial difficulties can cause system risks.
  • Fraud risks – These are in-house risks instigated by employees of banks or financial institutions facilitating ACH transfers. Employees can change customer data or access protected data looking to misappropriate customer funds.
  • Operational risks – ACH transfers also present with several risks originating from clerical errors. Several operational risks, including software failures, computer network failures, power failures, natural disasters, staffing issues in the financial institution, and general clerical errors, such as alteration or duplication of information, can jeopardize ACH payments.


Preventing Fraud In ACH Systems

Financial institutions and ACH transfer providers should put in place several security measures to protect their customers against fraud. Below are effective measures that can mitigate fraud on ACH systems:

  • Data encryption – Encrypting customer and transaction details can prevent various forms of ACH fraud.
  • Authorization – This fraud prevention measure relies on an agreement between the receiver and originator. Here, the originator should initiate a debit transaction to the receiver’s bank account. This is important because the receiver will ideally have to grant access for the transaction to be completed.
  • Authentication – Unfortunately, passwords are no longer enough to protect individuals, businesses, and financial institutions from fraud. Coming up with complex passwords is also nearly impossible, making it necessary to implement extra safety measures, specifically two-factor authentication.



The increasing adoption of digital payment methods has exposed businesses and financial institutions to fraud and hacks. Businesses should approach ACH transfer risks proactively rather than reacting to the aftermath. Like other business risks, understanding these potential risks enables businesses and vendors to implement best practices to secure their payments.


Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.



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