E-Complish Teams With Plaid to Validate Accounts And Funds for ACH Transactions

In an effort to move automated clearing house transactions closer to real-time, E-Complish, a New York City-based payment processor, announced Monday it has teamed with data network Plaid Inc., to validate a bank account, and the funds in it, for ACH transactions.

The service makes it possible for E-Complish customers to comply with Nacha’s Web Debit Account Validation Rule, which goes into effect March 19. The rule stipulates that bank accounts tapped for ACH transactions initiated via the Internet or a mobile device must be validated through a verified method to ensure the account is authentic and active. 

The ability to authenticate an account and the funds in it has been a missing piece of the risk-management puzzle around ACH transactions with Nacha’s moves in recent years to adopt same-day settlement. Enabling account and available-funds verification is expected to reduce the number of denied ACH transactions for such reasons as no account found, invalid account, and insufficient funds.

“The integration of Merchant-E-Complish-Plaid-Bank creates a unique four-way process of bank-account and balance verification that will reduce ACH returns and increase overall ACH deposits at the lowest cost possible for the merchant,” E-Complish chief executive and chief security officer Stephen Price said in a prepared statement.

While the new offering is expected to reduce denials of ACH transactions, just how effective it will be depends on when the validation takes place, observers say. 

“Unlike card transactions, funds for ACH transactions are not set aside to guarantee the transaction,” says Patricia Hewitt, owner of PG Research and Advisory Services. “If this just validates the account and funds at a specific moment in time, then it needs to be tightly coupled with same-day ACH settlement.”

Nevertheless, Hewitt adds that reducing denied ACH transactions can help lower merchant costs and make the ACH a more palatable way for consumers to purchase online or through mobile devices. “Every time a merchant has to re-present a transaction, the cost of processing it goes up and friction around the transaction grows for the consumer,” Hewitt say. “Given the volume of ACH transactions, [reducing denied transactions] is a good thing.”

Plaid, which has built its business around connecting directly to banks to enable financial technology providers to verify and tap bank accounts, was recently embroiled in a Department of Justice antitrust lawsuit when Visa Inc. attempted to acquire it last year. Visa pulled its $5.3-billion offer for Plaid in January.