Payments Pros – The Payments Law Podcast

ACH Risk for Payment Processors and ODFIs

Sep 21, 2023

In this discussion, James Rowe and Nanci McKenzie from Affirmative Technologies share their expertise in ACH processing and risk management. They dive into the importance of ACH risk monitoring and the need for predictive models to evaluate originator risks. The duo also introduces their innovative ACH risk scoring tool, akin to a FICO score, to help financial institutions manage unauthorized transaction risks effectively. Key insights revolve around regulatory expectations and the evolution of risk management in the fast-paced payments landscape.

35:10

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Episode guests

James Rowe

Nanci McKenzie

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Quick takeaways

Effective ACH risk monitoring is vital for payment processors and ODFIs to mitigate unauthorized transaction risks and ensure compliance.

The development of a predictive risk scoring tool, similar to a FICO score, enhances risk assessment for ACH originators based on historical data.

Deep dives

Significance of ACH in Payment Processing

The ACH network plays a crucial role in the payment processing industry, representing an immense volume of electronic transactions. In 2021, ACH accounted for about $95 trillion of the total $129 trillion in non-cash payments. This popularity stems from its efficiency and cost-effectiveness, making it the preferred method for various transactions, including debit payments. Despite emerging technologies like FedNow, ACH remains integral due to its established trust and operational efficacy in financial operations.

Harnessing the Power of ACH in Electronic Payments

01:20

Historical Data is Key to Predictive Risk Management

01:20

Intro

5min

Exploring Risk Management in Payment Processing

2min

The Evolution and Impact of ACH Payments

9min

Predictive Analytics in Risk Management

17min

Assessing Risk in Payment Processing: A Statistical Approach

3min

In the latest episode of Payments Pros, hosts Carlin McCrory and Keith Barnett are joined by James Rowe and Nanci McKenzie from Affirmative Technologies to discuss Automated Clearing House (ACH) originator risk.

Affirmative Technologies is one of the nation's leading technology providers in ACH processing and risk management software. The company provides innovative electronic payment solutions to a wide variety of businesses, including financial institutions, third party payment processors, and business entities that seek an effective enterprise, ACH payment solution.

James and Nanci highlight the importance of ACH risk monitoring in the payment processing industry, accounting for a significant portion of noncash payments. They discuss the need for a predictive model to assess the risk of a particular originator, which can help payment processors and Originating Depository Financial Institutions (ODFIs) decide whether to onboard an originator, or how to monitor them once onboarded.

They also discuss Affirmative Technologies’ ACH risk scoring tool, which uses historical data to predict the likelihood of an originator submitting an unauthorized transaction. This tool, similar to a FICO score, can help financial institutions manage their risk more effectively.

The group also touches on the regulatory expectations for and increasing focus on risk management.

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Payments Pros – The Payments Law Podcast

ACH Risk for Payment Processors and ODFIs

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Significance of ACH in Payment Processing

The Need for Predictive Risk Management Models

Technological Innovations in Risk Assessment

Regulatory Expectations and Outcomes

Harnessing the Power of ACH in Electronic Payments

Historical Data is Key to Predictive Risk Management

Remember Everything You Learn from Podcasts