payments
10 Commandments of ACH Processing For Brokers
May 18, 2023deBanked recently spoke with Zalman Notik, the Operations Manager of MCA Track & GoACH. Notik offered up so much advice about ACH processing that it’s been codified into a helpful list! Below are his 10 Commandments of ACH Processing.
1. Always disclose your fee. Merchants are generally okay with paying something they agreed to pay if it is disclosed.
2. Make sure that everything agreed to is in writing and plainly stated. e.g. “We’re going to debit your account for $1,000 when we get you approved for a loan.” There’s a difference between the short, long way and the long, short way. To avoid lengthy disputes, negative Google reviews, and claims of undisclosed fees, opt for the straightforward method rather than the convoluted one.
3. Remind the merchant (in writing and by phone) that you will be debiting their account on X date. As a courtesy reminder it’s probably a good idea to give that merchant a phone call saying, “Hi, John, congratulations, I got you the $100,000, we’re so excited that it worked out well and I’d like to remind you that for our agreement we’re going to debit your account tomorrow.” This can avoid a broker’s payment getting returned if in fact that merchant planned to transfer all their funds elsewhere.
4. Any change to the amount that was agreed to should come with new signed paperwork. If a broker has a piece of paper stating that they’re allowed to debit somebody’s account $10,000 and then debit them $4,000, $5,000, or $8,000, that merchant could dispute it, and they will win because they never agreed in writing to $8,000, they agreed to 10.
5. Collect a copy of the merchant’s ID and a voided check with the business name on it. Be sure that everything matches.
6. Confirm with the merchant that they own the account – Not a spouse, cousin, or friend etc. When checking state records and the business is owned by a spouse, that spouse should be signing the agreement. For example, if a couple owns Joey’s pizzeria and one of them signs the paperwork there could be a possibility that broker will receive a dispute two months later. Turns out that the other spouse is the legal signer on the bank account and now that broker is out of money. A good way to verify is through IDs or a voided check with the business name on it.
7. Communicate with your ACH provider – e.g., “The merchant said the payment will not clear etc.” No one likes surprises. Communication with the ACH provider makes them feel comfortable about working with that broker again in the future.
8. Store paperwork in a secure location so that if there is a dispute you can provide everything to the ACH processor in a timely fashion. NACHA Operating Rules & Guidelines are enforced by the government for every ACH payment. If a broker debits an account, and that merchant disputes the transaction over a period, that broker will need to provide paperwork to prove those disputes. Keep those files in a Dropbox or Google Drive account or somewhere safe and accessible.
9. Keep funds in your bank account to cover fees and returns. Having $0 in your account is a bad fit so be disciplined in keeping money in one’s account.
10. Don’t be an A*$%#%$ – if you treat your merchants well and communicate with them, you won’t find yourself fending off disputes etc. Despite what someone may sign, if the merchant feels they have been mistreated throughout the process it’s not going to stick, potentially leaving that broker with problems.
Past-Due? Your Customer May Judge How You Handle That With Them
March 28, 2023
Ask yourself this, that customer who missed a payment, do you actually want to continue working with them in the long run? If so, consider just how critical your approach to that missed payment will be. According to a survey, 40% of customers would consider switching to another service provider if a past-due situation resulted in a negative experience. The survey was conducted by Lexop who also found that Gen Z was even more sensitive to these encounters compared to other generations. A whopping 49% percent of Gen Z customers said that they would consider switching after a negative past-due experience, for example.
But good riddance to those that can’t pay! Right? Well, maybe not. Sixty percent of consumers late on bills were late for non-financial reasons, according to the same survey. Thirty percent said they simply forgot to pay and ten percent reported that errors on the bills themselves were to blame. Eight percent said it was simply a matter of their credit card on file expiring!
Oftentimes this situation results in the payment being made. Eighty-five percent of past-due consumers are paying within 30 days of the due date, for example. But were they happy with the process to lead them there? That is the question.
Lexop is a financial technology company that helps organizations automate and scale their collections operations.
Big Short Seller’s Allegations About Block Don’t Make Block Look Too Good
March 23, 2023
Block, the parent company of Square Loans, suffered a rough day in the market (down 15%) on Thursday after an activist short seller made bombshell allegations about the way Block conducts its business. Hindenburg Research, the short seller, posted a report of alleged findings it had uncovered over a period of two years. In Block: How Inflated User Metrics and “Frictionless” Fraud Facilitation Enabled Insiders To Cash Out Over $1 Billion, the report focuses almost entirely on alleged shenanigans with Cash App. Block has often been referenced in the pages of deBanked because of its massive small business lending subsidiary, Square Loans, which last year originated $4 billion in funding to merchants. That subsidiary was not the subject of the report.
While one can read the report on their own and form their own opinion, which the authors hope to profit from by Block’s stock going down, it should be noted that the timing of its release is a little suspicious. Block, for all the bells and whistles it has in payments and lending, is at its core these days, a crypto company. Block generated $7.1B in revenue just off of Bitcoin alone in 2022, perhaps making it an easier target given the string of recent events.
3/12/23
- Regulators shutter Signature Bank. Rumors abound that it was less about solvency and more about governmental dislike of its crypto clientele.
3/22/23
- Coinbase reveals that it received a Wells Notice from the SEC
- Tron founder Justin Sun sued by the SEC
- Several celebrities including Lindsay Lohan charged by the SEC for failing to disclose compensation they received for crypto promotions
- The President published his annual Economic Report which referenced crypto with astounding frequency
3/23/23
- Hindenburg Research releases its report about Block, causing the company stock to plummet 15% in a day. Although the focus is not on crypto, Block’s big revenue generator is Bitcoin, which generated $7.1B in revenue for the company in 2022.
Borrower Didn’t Make Their Payment? Maybe They Just Forgot
November 18, 2022
When borrowers gets squeezed, who will they pay first? According to a survey conducted by Lexop, American respondents ranked mortgage and rent payments as having the highest priority among recurring bills. Utilities (water, electricity, and gas) came second, car loans third, phone/internet bills fourth, and personal loan payments dead last. That may not be what lenders want to hear but the information could prove helpful in preparing for an economic downturn.
Notably, a missed payment may not even be a sign of financial stress. According to the same Lexop survey, 34% of respondents stated that the primary reason they had for being late on a bill was that they simply forgot. A majority also disclosed that they were late in paying because of other non-financial issues like invoicing errors, not having access to the bill, payment method issues, and more.
These seem like addressable issues especially since 35% of respondents wanted digital reminders via text or email. Less than 10% preferred they be reminded via phone call or snail mail.
“Empowering consumers to work with collectors toward meeting their payment goals is the best way to foster healthier business-customer relationships that will ultimately result in increased debt recovery and customer retention,” said Amir Tajkarimi, Chief Executive Officer and Co-founder of Lexop, in a published statement related to the findings. Tajkarimi was a panelist on The Need for Speed in Payment & Collection at the Canadian Lenders Summit in Toronto this week. There, he explained that his firm was hyper focused on improving the collections user experience and emphasized that a missed payment is not always the result of a borrower not having the resources to pay.
The data revealed from the study is timely since 60% of respondents also shared that they were concerned about their ability to pay bills over the next 6 months.
Apple Pay Later?
June 15, 2022
Apple is joining BNPL stalwarts Afterpay and Klarna with its own product called Apple Pay Later. Joining the Apple suite of finance products such as Apple Card, Apple Cash, and Apple Wallet, it is planned to launch in the fall of 2022 as a new feature in iOS 16. Apple will offer customers the ability to split their payments into four over a six-week period with no added interest or late fees. These payments can be deducted automatically or customers can choose to opt out and make the payments manually.
Customers will be able to link their debit cards to Apple Pay Later when making transactions but will only be able to borrow $1,000 at max. And the limit one gets depends on their Apple credit history. The new loan service will use Apple IDs to check payment history before purchases to prevent fraud and track one’s account information to determine if they’re eligible. Missing a few Apple Music payments might make an approval less likely. for example.
Buy Now Pay Later is becoming extremely popular. According to thefinancialbrand.com, BNPL is expected to skyrocket from 1.6 million users in 2018 to 59.3 million users in 2022 with the leading users being Millennials and Gen Z. Apple is entering the market with a competitive advantage since many retailers already offer Apple Pay.
SoFi Says it is Working With SMB Finance Companies
May 10, 2022
SoFi may not exactly be in the small business lending market per se, but a digital payments company it acquired in April 2020, Galileo, has been put to good use.
“Galileo continues to expand its client base to include B2B and enterprise clients as adoption of modern cloud-based digital payments and banking has opened up new verticals and client types, use cases and opportunities,” said SoFi CEO Anthony Noto during the company’s Q1 earnings call. “For example, we launched two new clients in the first quarter that offer innovative working capital models for B2B and small- to medium-sized businesses.”
Noto said that they were not naming specific names at this time. “We will announce those [names] in conjunction with our partners as opposed to during our earnings call, but that’s increasingly a big channel for us, and we have a product pipeline to better serve the enterprise and SMB space holistically based on the demand we are seeing.”
SoFi reported a Q1 net loss of $110M, which it said was an improvement over the $177.6M net loss it recorded during the same period last year.
NovoPayment, Latina-founded BaaS Plans to Expand
April 21, 2022
Novopayment has raised $19 million in Series A financing, led by Fuel Venture Capital and IDC Ventures. The company, which offers digital banking, payment, and card solutions, is planning to grow and expand within current and further US markets while focusing on countries in Latin America and the Caribbean.
CEO and Co-founder Anabel Perez stated, “We define a digital payment as the simple transfer of value from one payment account to another using a digital service such as a mobile device, POS, or computer.”
With the new funding, NovoPayment plans to continue increasing capabilities, introduce new features and functionalities, heighten security, and capitalize on US market opportunities. To accelerate their expansion of current offices in Mexico, Colombia, Peru, Ecuador, and headquarters in Miami, they are adding over 100 new engineers, business development, and product experts to their team. Austin and San Francisco are the first two spots where the branching out will begin.
“Austin and San Francisco are huge hubs for tech innovation and we want to expand there to ensure we attract the best talent for our operations,” Perez discussed. “As we grow in those markets, we’ll assess if we need more boots on the ground in additional states.”
NovoPayment currently holds a strong placement in the LAC region and works with several US clients and partners. This places the company in the right position to broaden in these markets they already have successful track records in.
“Based on our ongoing discussions with clients, we have special insight into the challenges and technology gaps these markets face, and realize the potential to further connect the Americas with a common banking infrastructure. We will be growing our product offerings to enable new data and money flow solutions to account for the increasingly globalized, cloud-based world of financial services,” Perez explained.
As Miami is the “Latin America capital of the US,” NovoPayment holds an advantage as a native of South Florida with the tech scene gravitating towards this region. Miami has served as a gateway to other markets.
“Unlike other companies that are now playing catch up and rushing to the LatAm market, we have a strong foothold and reputation in 14 markets across the Americas,” said Perez. “Establishing those relationships, and understanding the nuances of each market, requires regional expertise that takes time to build.”
Q & A with Ryan McCurry of ACHWorks About the Future of Small Business Lending
February 22, 2022
In a recent chat, deBanked talked with Ryan McCurry, President of ACHWorks. McCurry discussed the future of his company, payments, small business financing, and the impact of digital assets on the industry.
Q (Adam Zaki): Your company recently announced an acquisiton. How does this move help take ACHWorks to where the company wants to go?
A (Ryan McCurry): We are excited to share that ACHWorks was acquired by VeriCheck Inc. on December 31, 2021. VeriCheck Inc. (VCI) is a wholly owned subsidiary of Commercial Bank of California (CBC), who has been one of ACHWorks’ sponsor banks for nearly 20 years.
The acquisition brings more resources, both in terms of staffing and capital to ACHWorks’ business efforts. Conversely, ACHWorks’ sales approach, market specializations and diverse technical capabilities will support VCI’s growth goals. By combining the teams and technology, we believe we will compound our benefits to reach an even higher level of success together.
The great news with this acquisition is that where ACHWorks was weak, VCI is strong. Likewise, ACHWorks has some unique technology and expertise that VCI hadn’t leveraged before and can now capitalize upon.
Furthermore, VCI relies heavily on partnerships with ISO’s and third party gateways for processing ACH payments with a high number of merchants across all sectors, whereas ACHWorks tends to specialize in a few verticals while maintaining direct sales and direct relationships with all merchants – even when the merchant is utilizing an integrated software partner.
Q: Are ACH payments here to stay? With so many ideas floating around in this space, what is the future of ACH?
A: The future of the ACH as a payment system is strong and growing quickly. In 2021, the ACH network grew by 29.1 billion payments valued at $72.6 trillion dollars. Same Day ACH grew by 74% over 2020 and total volume was up almost 9%, continuing a 7-year growth trend. Business-to-business ACH payments grew at a rate above 20% and 33% over the last two years, respectively.
We believe the ACH payments space is going to continue to grow and become a more widely used payment rail, and our acquisition is evidence of that growth.
Q: What is the biggest issue your company is currently overcoming?
A: There are always challenges facing the payments industry. Naturally, as a fintech industry, payments companies regularly face emerging technology, regulatory or legislative activity, and ongoing cybercrime.
Currently, our focus is blending the VCI and ACHWorks teams and evolution of our joint technology. We are pleased to share that VCI hired the entire ACHWorks operational team, and is retaining all of our existing technology and benefits to our clients. Bringing the two platforms and teams together will have exponential benefits for clients and partners moving forward.
Q: The small business financing industry is becoming less reliant on the traditional sales models. How will ACHWorks combat this? Will you help the funders/brokers innovate to help secure the current infrastructure or seek new tech clients that are stepping into the space?
A: There’s the old saying that change is the one constant. Initially, business finance companies only wanted ACH for reoccurring daily debits, and as merchant demographics changed weekly or custom payment frequencies have become more prevalent. However, now about half of our business finance clients use ACHWorks’ technology not just for debiting merchant receivables, but also for sending ACH Credits to merchants for funding a deal, automating syndication payments for participation rates or paying commissions to brokers.
Likewise, ACHWorks offered Same Day ACH capability to our clients on the first day it become available on the ACH Network. The use of Same Day ACH has been slowly increasing as funders utilize it both to fund merchants or to act on a merchants request to charge them today (most common on distressed accounts).
As the funder / broker relationship continues to evolve, ACHWorks will be there to help facilitate the movement of the funds. We hope to leverage our unique status of being owned by a bank to bring new technologies to the business finance industry and other spaces that are under-supported by traditional payment processors. We are excited for these new capabilities to come and will keep the deBanked community updated as we have more to share.
Q: There seems to be a lot of payments companies across fintech. The elephant in the room at Money 20/20 in October was the ‘payments bubble’ taking place. What is your take on this? Is fintech looking too much into payment processing innovation?
A: Automobiles have been around for about 140 years, and yet innovation continues to happen. They have seen the switch from steam to electric, to internal combustion and back to electric. Computer technology has only been common in business usage since the 50’s and the internet has only been heavily used since the late 90’s. When I started in this business, we used to mail our software to clients on a series of 14 floppy disks. I would argue that the innovation and evolution of payments and fintech is only in its infancy.
As technology continues to permeate all walks of life, we expect to see payments leveraged to make commerce more organic with far less friction. Most payment processors I speak with feel that we are the original “fintech” and that the newly emerging “fintech” market is just utilizing the infrastructure we put in place.
Q: Are cryptocurrencies a topic of conversation in your office? Blockchain tech offers major benefits in the payments world. Do you or your company have any thoughts on how this could be leveraged?
A: You can’t escape crypto, it invades all conversations these days. However, our focus is on working with fiat currency and regulated payment channels because we process ACH payments through the Federal Reserve utilizing State or Nationally chartered banks. Don Singer, the CEO of VCI and I were discussing this topic previously, and he told me crypto is the new shiny sports car, or personal aircraft, but we work on the rail road. ACH is not as sexy as crypto, but it moves nearly all of the money in the U.S. Those debit card, credit card, Venmo, Zelle and real time payments systems are just the messaging systems, the money is being moved later that day, and it’s being moved via ACH.
