Commercial businesses should verify bank routing number information for three primary reasons:

  • Eliminate Errors
  • Comply with Requirements
  • Reduce Costs Associated with Returned Items

Routing number verification is critical when payments originate via the Internet, telephone or anytime the person or check is not present. Such transactions are more susceptible to inaccurate information. For example, a customer trying to initiate a payment over the Internet could accidentally enter an account number in the routing number field and a routing number in the account number field. A customer using a telephone keypad to initiate a payment could press a wrong key and enter an invalid number. Both examples would cause inaccurate information to be entered into the Automated Clearing House (ACH) Network causing an exception and a return, costing the Originating Depository Financial Institution (ODFI), Third Party Service Provider (TPSP) and the ACH Originator money. ODFIs pass the returns fees they incur onto the TPSP or Originator responsible for the inaccurate or invalid information. Some charge two dollars or more for returned ACH transactions and twenty dollars or more for returned checks. A business using bank routing verification services will catch such errors before they enter the ACH network, thereby saving both the expense and hassle of a returned transaction.

Businesses, especially those at high risk for introducing errors into the network, are obligated to verify routing numbers according to the National Automated Clearing House Association (NACHA) rules and regulations. NACHA requires that TPSPs and originators use a commercially available means of verifying the accuracy of ACH numbers (bank routing numbers used in ACH transactions). ODFIs must maintain standards set by NACHA to ensure quality in the ACH Network. Financial institutions may be fined or even lose their ODFI status if they are the cause of excessive returns. For this reason, many financial institutions refuse to originate ACH payments from businesses viewed as high-risk or include tough quality requirements in their Origination Agreements. For such businesses, verifying bank routing numbers (and account numbers when available) is essential to being approved and maintaining a favorable status with their ODFI or TPSP. Furthermore, NACHA lists developing a database of terminated originators as a major objective in its 2006 Risk Management Strategy recommendations. If approved, this database would prevent previously terminated originators from contracting with another unsuspecting ODFI or TPSP.

Using quality bank routing number verification products allows businesses to maintain a favorable status with their ODFI or TPSP and comply with all NACHA regulations. Businesses also find that it is cost effective to verify routing number information on the front end of a transaction, rather than pay the fees associated with returns due to incorrect information.

Lyons Commercial Data is the leading source of bank routing number verification and account number validation products and services. Lyons offers an online routing number tool, bank routing number databases, and web services for seamless integration with payment systems.

Lyons Commercial Data’s staff includes developers experienced in payment processing systems as well as Accredited ACH Professionals (AAPs). Contact Lyons Commercial Data at 800-684-0388 for more information.