How Industry Collaboration Can Take Down Transaction Returns And Fraud

As the volume of non-cash payments, and specifically ACH payments, continues to rise, the payments industry is challenged to reduce transaction returns as well as account take-over fraud. Fueled by the increase in online payments, ACH volume grew to almost 22 billion transactions equating to $38.7 trillion in value in 2013 and has continued to climb in 2014. During this same period, transaction returns due to non-sufficient funds, administrative errors and unauthorized ACH returns as well as account take-over fraud as a result of data breaches continues to create growing industry losses.

Recently, David Barnhardt, Vice President of Product Management at Early Warning, a leading fraud prevention and risk management company, told PYMNTS that the company offers innovative solutions to reduce transaction returns and fraud. According to Barnhardt, Early Warning leverages transactional data contributed by hundreds of financial service organizations (FSOs) to help create a consolidated, single view of fraud activity across the industry.



Owned by five of the nation’s largest financial institutions, Early Warning serves as Trusted Custodian® to the National Shared Database℠ Resource, explained Barnhardt. With data contributed by leading financial services organizations, Early Warning utilizes this Collaborative intelligence. Trusted exchangeTM model to help organizations fight fraud, manage risk and remain compliant.

“The data that the company receives from its contributors can only be used for fraud or risk purposes,” said Barnhardt. “Our mission is to protect the financial system through our products and services. It is our goal to help financial system stakeholders prevent fraud and mitigate risk while allowing for more frictionless transactions to better serve their customers.”



With the rise in digital commerce, transaction returns due to non-sufficient funds, administrative errors and unauthorized transactions continued to grow in 2014. In 2013, non-sufficient funds returns were valued at $200 billion, administrative ACH returns were valued at more than $17 billion and unauthorized ACH returns were valued at more than $1 billion. Additionally, account takeover reached an all-time high in 2013, a 43 percent increase from 2012 that equaled $5 billion in losses.

These days, consumers are demanding more immediate payment capabilities. Similarly, they expect to see fund transfer details and electronic confirmations. In other words, says Barnhardt, they want frictionless payments, but frictionless payments can also mean greater fraud vulnerabilities.

“One way organizations can reduce risk is by inquiring into Deposit Chek® Service or Payment Chek® Service with account owner authentication from Early Warning,” said Barnhardt. “Early Warning works with an extensive network of financial institutions that contribute a wealth of relevant, timely data. As a result, the degree of intelligence we can provide in the payments space is virtually unmatched by anyone else in the industry.”

And with its real-time Payment Chek Service with Account Owner Authentication (AOA), Early Warning provides insight on more than 383M deposit account owners associated with more than 260M deposit accounts, which means organizations can decrease losses due to returns and fraud.



The challenge of mitigating fraud losses is likely to increase for financial service organizations, says Barnhardt. As of August 26, 2013, NACHA approved new rules to further improve the ACH network that will lower the acceptable return rates for both unauthorized and administrative returns (effective September 2015).

“That rule change could generate financial penalties that processors, banks and businesses haven’t planned for,” he said. “Many of our customers are working to provide faster funds availability and access to services – and the key to that is risk mitigation upfront.”

To help customers achieve this, Early Warning offers account status with account owner elements – and in real-time. That real-time factor, said Barnhart, serves to complement customers’ business models.



As the industry continues to push for faster frictionless payments, there will be a greater emphasis on immediate risk mitigation, said Barnhardt. And as mobile wallets increasingly gain momentum, that will drive new products for wallet provisioning and authentication.

“Currently, card fraud is all the rage (highest loss category across agencies), however as EMV rolls out in the U.S., we have been looking to the U.K. – I believe they were the ‘canary in the coal mine.’ Check fraud and online losses in the U.K. spiked, because those were the old reliable channels of opportunity that fraud operators resorted back to,” he said.

As a result, Early Warning is enhancing its Deposit Chek Service with counterfeit check status detection which will become available in 2015.

“The product will help to combat the losses that financial institutions are dealing with every day,” he said. “In addition, it will strengthen our customers’ ability to detect counterfeit items if and when there’s a spike upon the rollout of EMV cards.”


For a better understanding of why account authentication matters and how Early Warning can help, download the infographic below or visit





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