This blog post comes from Ryan Hodge, Dwolla’s Financial Intelligence Unit Director, BSA & OFAC Officer.
“You authorize <your payments platform here> to provide ACH processing instructions to the Bank and for the Bank to initiate ACH debits and credits with you using that information. You agree to perform all acts required of an Originator under the NACHA Rules. You make to the Bank all representations and warranties that an Originator makes to an ODFI under the NACHA Rules.” — Verbiage pulled from popular payment platform’s TOS
Seems simple, doesn’t it? You give a payment platform instructions, and they carry them out. You can now focus on your core business. However, there is a key word fraught with meaning in this TOS agreement, one which passes on a significant amount of responsibility to your business: “Originator”.
What does it mean to be the Originator?
In agreeing to act as the Originator, you stand in a role with specific requirements you must fulfill per NACHA—the administrator of the ACH network. As the Originator, you are responsible for following the NACHA Operating Rules (the 2016 edition is over 500 pages) and other guidance around obtaining proper authorization for your ACH entries. This constitutes everything from the language of the authorization to the way in which you obtain and validate it.
Before agreeing to this payment platform’s TOS, it is important that you ask yourself: “How is my payments provider assisting me in meeting these obligations or even communicating them to me?”
On top of following the NACHA Operating Rules, you will also need to be conscious of following applicable industry regulations, a common one being Regulation E. Regulation E mandates that you provide proper notification and information to your consumers about the payments they have initiated or received, among other requirements (like dispute resolution). Is your payment provider going to assist you with this?
Aside from whether or not your payments provider is giving you the guidance you need in these areas—user notifications, dispute resolution—ask yourself: “Is the role of Originator even a role I even want to be responsible for?”
Origination & Dwolla
An advantage of working with Dwolla is that, in our partnership with our financial institutions (“FIs”), we maintain the role of the Originator, while giving you the information you need to facilitate payments for your business. For example, our robust APIs inform you when payments are successful or have failed, when notification is required, when a customer’s bank account has been verified, etc.
Further, in our role with our FIs, we have already undertaken additional work to deliver even more functionality to you. For example, because our payment platform has the power to keep your customer’s funds in their own “self-owned” Dwolla balance, Dwolla can power a variety of business models—savings applications, P2P, crowdfunding—without those businesses needing to take on the full regulatory burden that building it on their own system would require.
Dwolla’s expertise in this area has been earned over the years—we provide you with sound, audited practices you can extend to your customers. With our White Label product offerings, we can jump-start your business plans by providing you with a powerful bank transfer API to bake into your platform or application, while you customize the onboarding and payment experience.
Focus on growing your core business even faster, not building out the multiple departments that developing and managing an entire payments infrastructure in-house requires. Leverage our platform to power payments in the background.
Reach out to one of our integration specialists today to see how our platform can save you time, money, and headaches.
Interested in how your business could be utilizing the Access API within your platform or application? Reach out to our sales team.