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ACH Risk, Reporting, and Reviews: 3 Considerations for CUs Expanding Business Services

By Brad Johnson, Director of Solutions Consulting at Centrix Solutions, a Q2 Company

More and more credit unions (CUs) are exploring the idea of expanding their business services. Some are well on their way, with commercial bankers recruited and ready; other CUs are a little more cautious—having done little to adopt more complex business services. And caution is more than understandable. Credit unions’ historical focus on consumer offerings gives them unrivaled expertise in retail services, but it also makes the prospect of expanding into the complex realm of business services a bit unsettling.

At the very least, CUs find themselves facing a lot of questions when they start to seriously consider expanding their business services: Is their core equipped for commercial account processing? Will their online platform provide the entitlements control, reporting and other features necessary to serve larger businesses? What transaction channels should be supported—ACH origination, wire, RDC?

And, often, the  answer to one question simply generates more questions.

Take the subject of ACH origination services. A lot of CUs have limited ACH origination activity already, but if they intend to grow their business services, ACH origination volume will no doubt increase. To plan for this, the CU must take a hard look at their current processes and technology and find scalable ways to handle a bigger ACH lift, while simultaneously mitigating risk.

 Three of the biggest ACH considerations around expanded business services are:

 1. ACH monitoring and anomaly detection

New clients represent increased risk. As CUs expand services, they’ll see a sharp increase in the resource requirements necessary to underwrite and manage new commercial members—some of whom might be originating more activity on their own than the CU previously originated from all its members combined (assuming they did any at all).

It’s vital to be proactive, implementing technology before ACH activity begins to spike. CUs must find tools that can automatically monitor ACH activity to detect anomalies, manage exposure limits and provide general oversight of all origination activity.

Starting with a solid, proactive strategy around monitoring and general data management for ACH origination will prove well worth the investment as activity grows. On the other hand, a reactive strategy, and managing the process with a lot of manual intervention, substantially increases both your risk and the stress on your operations staff.

2. Accurate and regular reporting

CUs expanding their business offerings may face an exponential increase in workload, making it next to impossible to track and report ACH activity manually. CUs hoping to scale their business services should not depend on unwieldy Excel spreadsheets, but should instead invest in efficiency-boosting reporting tools.

Even if a credit union doesn’t have the originator volume to support a reporting platform at the start of their foray into business services, by investing in robust, intuitive technology early on—coupling ACH reporting with monitoring and data management functionality—they will ease growing pains and substantially reduce risk. A full-featured ACH reporting platform can save a lot of time and effort by quickly and easily generating reports for the CU’s board or for annual ACH audits.

3. Annual risk reviews: what you need to know

Regulations require a comprehensive risk assessment on each originator at least once per year. But, more than just a compliance box to check, these assessments—if done right—can greatly reduce risk by providing insight into originators’ business activities. CUs should keep in mind that the risk surrounding commercial accounts is made up of more than their ACH activity. A solid risk assessment process, powered by the right tools, will look beyond ACH activity to include the overall financial health of the originator. Assessments should be able to spot red flags in customers’ deposit accounts—like insufficient funds and overdraft activity—as well as their loan positions or past due history. A business that has no anomalous ACH activity may still present significant risk. Identifying the warning signs early can help manage that risk—and the relationship with that business—in ways that ultimately benefit both the CU and the business in the long run.

Expanded offerings doesn’t have to equal increased manpower

Increased services don’t necessarily equal an increase in payroll. With the right tools, credit unions can expand their business offerings, while reducing the ACH-related workload of their back-office employees. CUs on the fence about implementing more business services should remember—the right tools can make the prospect less frightening and the process more profitable.

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