Everything you read (about ACH risk management) may not always be accurate

Last week I tweeted about an article published by Digital Transactions on August 19, 2010. The headline, which read:  “A Survey Reveals a Rising Volume of Disputed ACH Debits,” could have led readers to believe that all hell was breaking loose in the ACH industry.  The article cited a survey, conducted by eGistics, that indicated financial institutions and payment processors had a 63% rise in disputed or unauthorized ACH transactions in 2009 as compared to 2008.

I must say that the article troubled me because I know (through firsthand experience in running ACH businesses and as a NACHA Board member) how much real progress we have made in managing ACH risk–especially the risks posed by unauthorized ACH transactions.

Both NACHA and the Risk Management Group have done a lot of work to help create the subsequent rule changes that have reduced return item risk and volumes.  So I did some investigation to understand how eGistics came up with their numbers and cross-referenced to the return numbers tracked and published by NACHA–the organization responsible for establishing and enforcing adherence to ACH rules. Thus NACHA’s numbers depict a far different picture than eGistics.

eGistics also conducted a webinar to discuss their survey results.  In the webinar, eGistics described the processors and financial institutions participating in the survey. They further indicated that many of their respondents experienced ACH growth far beyond the industry rate of 2%.  These respondents had actually seen their ACH volume grow 20% or more and that amount of growth explained how return rates for these specific FI’s and processors were higher due their individual origination growth rates.   That is not a true indication that return rates, as an industry, are once gain climbing; nor a true reflection of the experience of all ACH originators.  Nevertheless, it did explain to me the Digital Transaction headline— that is and was not representative of all ACH participants!  A truth is that return rates of all kinds will increase as one’s origination volumes grow!  The experience of a few “does not a trend make.” This NACHA published chart demonstrates that returns ARE going down:

I hope my analysis provides more complete picture; dispels any unwarranted fear and sets the record straight.  A return item volume has been declining ever since NACHA’s network rules and enforcement efforts became more robust! Do not believe everything you read (and that goes for me as well). Ask questions to understand what is really behind the headlines!