The Automated Clearing House (ACH) network facilitates money transfers from one bank account to another. ACH fraud occurs when funds are stolen through the ACH network.
Criminals are able to carry out this kind of theft when they have access to two pieces of information: a bank account number and a bank routing number. Armed with this information, they can fraudulently send lump sums, make recurring payments, or issue unauthorized payments for goods and services. According to J.P. Morgan, ACH payment fraud has increased by 10% since 2021, making it a growing priority for risk-averse businesses.1
ACH fraud can be damaging to cash flow, especially on small businesses with tight margins. Unfortunately, these are the very businesses that may lack the resources or technological capability to combat fraud. This is why it’s essential for small business owners to understand what are ACH payments and how ACH payments work. Using this information – and with the support of PayPal – the threat and impact of ACH payment fraud can be mitigated.
Common types of ACH payment fraud include:
There are significant consequences to ACH payment fraud, especially for small businesses that may not have the means to implement large-scale fraud-detection measures. Any loss of revenue due to fraudulent payments can be harmful, as can the damage to a business’s reputation following a data breach. That’s why recognizing warning signs and suspicious activity is so important – and why your business needs to be aligned with a provider of ACH protection, such as PayPal Seller Protection. (limits apply)
There are several best practice fraud prevention measures small businesses can put in place to help reduce the risks of a fraudulent ACH transfer. These include:
Measures to protect against ACH payment scams include:
There are several ways to reduce vulnerabilities in ACH transactions, including:
It’s essential that business owners and staff are well trained in recognizing the signs of fraudulent activity and well placed to detect phishing scams. This involves:
To properly implement these best practices, it is necessary to develop a system of fraud detection and response. This should include:
Fraudsters and their methods are constantly evolving and developing. To avoid being caught out:
It’s vital for small business owners to understand the potential impact of ACH fraud and the importance of effective prevention. When it comes to fraud, it’s always better to be proactive rather than reactive. Fraudsters are becoming more sophisticated, and fraud represents one of the greatest ongoing threats to any small business. Stay one step ahead by prioritizing ACH payment security with the help of PayPal’s fraud detection technology.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
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