ACH Payroll Processing & Fedwire Blog

ACH Payroll Processing & Fedwire Blog

The Death of Banking ACH

Thursday, February 11, 2016
The Death of Banking ACH

Banking institutions across the country are stepping away from providing services that don’t fit into their expertise. One such function is automated clearinghouse processing, which many companies utilize for payroll and direct deposit for their employees. Since these operations can’t be categorized as part of the banking niche, institutions are turning to more familiar services they can offer on a daily basis. Using banks for ACH direct deposit payroll processing is a dying obligation and it’s crucial for businesses to be prepared if and when that duty is no longer an option.

Is it worth the risk?
Banks started to drop ACH processing from their list of services around the 2008 Great Recession. This time was plagued with uncertainty about the financial landscape, including the uneasiness surrounding institutions with suspicious practices. Banks also started wondering if the risks associated with ACH payments were really worth the reward.

There are a variety of dangers when it comes to ACH processing. Operational errors can result from poor communication or lack of protocol, while fraudulent activity could come from unauthorized access to sensitive materials or untrustworthy employees, according to FRB Services. Institutions had to consider these risks, along with many others when deciding whether to continue ACH payments.

“Relief ACH processing ensures businesses don’t lose valuable time completing their payroll operations.”

The importance of relief ACH
Some national, regional and local banks opted to remove ACH processing from their offered services, informing customers of a specific window during which they needed to find another provider. Understandably, these businesses were in a pinch, as they did not expect their banks to cancel the service or to need a backup ACH institution. Since banks are still removing ACH payments from their organization assistance, it’s crucial for companies to find an alternative quickly to ensure they meet no disruptions in their processing.

Although relief ACH processing is a backup to a business’ primary processor – usually banks – these vendors many times transition to become the first source for this service. Initially a relief provider for some, Cachet has transitioned to become the primary processor for many of these organizations. Offering less stringent requirements than regular institutions and experience and expertise in the field, relief ACH is critical for maintaining a steady stream of ACH transactions.

What can Cachet do to help?
Cachet works with remarketers – third-party payroll service vendors that are looking for an ACH processing partner – to provide education and understanding for businesses that need it. Once simply a relief provider, Cachet has now become a primary processor for many organizations. Since Cachet is a non-bank processor, it isn’t subject to the same long list of regulations banks must follow. Instead, the company is focused on strong customer service, furthering their knowledge on the subject and filling the open niche banks have left behind.

Since security is such a cause for concern when it comes to ACH payments, Cachet provides a complete breakdown of the hazards involved, can streamline debits across multiple payrolls that remarketers service and offers customers a bond that protects them from suspicious activity.

With the gradual but eventual death of banking ACH processing, companies need to locate alternatives for their payroll and direct deposit operations. Working with a relief ACH provider can help businesses ensure their payment practices are secure and efficiently completed. Although some organizations may have a contingency plan in place, Cachet can fill the role of ACH partner and solution provider when the inevitable death of banking ACH becomes a reality.

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