Credit unions are increasingly exploring the idea of expanding business services. Some are further down this road than others, having recruited commercial bankers to jumpstart the initiative, while others are cautiously observing with little or no action. In all cases, the idea stems from the considerable growth and revenue opportunities, but the devil is in the details, and there is a lot to think about to mitigate risk and optimize efficiency.

For most, the idea of diving into the business services deep end is a bit frightening. Their historical focus on consumer offerings provides unrivaled expertise in retail services, but it also makes the prospect of change unsettling. At the very least, credit unions find themselves facing a lot of questions and concerns when they start to seriously consider expanding: Is the core equipped for commercial account processing? Does the 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? Plus, leveraging technology must be a priority. Any credit union hoping to broaden its business offering will need to answer these and many other questions in order to formulate a strategy. Often times, an answer will simply generate more questions.

Take the subject of ACH origination services, for example. Many credit unions likely have limited ACH origination activity today. If they intend to grow business services, ACH origination volume will no doubt increase. In planning for this, the credit union must take a hard look at their current processes and find scalable ways to handle more, while simultaneously mitigating risk.

Here are three considerations when expanding ACH origination services to support your credit union's business banking strategy:

1. ACH Monitoring and Anomaly Detection

New clients represent increased risk. Currently, credit unions might only have a handful of originators, but they'll need to be ready if they intend to scale their business offerings. As they expand services, they'll see a sharp increase in resource requirements to underwrite and manage new commercial members – some of whom might be originating more activity on their own than the credit union previously originated from all its members combined. Business members using Same Day ACH services will heighten that risk level even further.

A reactive approach to managing increased ACH activity is ill-advised and risky. With greater activity and risk, it's vital to be proactive. Start by implementing technology that can automatically monitor ACH activity to detect anomalies, manage exposure limits and provide general oversight of all origination activity. Consider, too, how you will charge for this service. Will charges be based on the number of files, or per transaction? How will these metrics be tracked? How will fees be calculated and assessed?

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

Arguably, one of the biggest barriers facing credit unions that want to expand their business offerings is the sheer workload involved. Transactions could increase exponentially, making it next to impossible to track ACH activity manually. Credit unions hoping to scale their business services should not depend on unwieldy Excel spreadsheets, but should instead invest in efficiency-boosting reporting tools. Without the right technology, time-consuming manual processes will quickly become overwhelming.

A credit union might not have the originator volume to support a reporting platform now, but by investing in insightful technology early – 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 when generating reports for the board or annual ACH audits. Back-office employees should be able to provide full transparency, creating visibility to management with comprehensive, regular reporting for lenders, relationship managers, regulators and auditors.

3. Annual Risk Reviews: What You Need to Know

Performing a comprehensive risk assessment on each originator at least once per year is a requirement. 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. This means streamlining and automating processes through technology that provides real visibility and reporting – and no longer depending on manual processes and Excel spreadsheets, which are highly prone to user error and require too much manual input to scale.

Keep in mind that the risk surrounding commercial members is made up of more than their ACH activity. A solid risk assessment process will look beyond ACH activity to include the overall financial health of the originator. Assessments should be able to spot red flags in members' 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 credit union and the business in the long run.

Expanded Offerings Doesn't Have to Equal Increased Manpower

Increased services shouldn't add up to increased payroll. With the right tools, credit unions can expand their business offerings, while reducing the ACH activity-related workload of back-office employees. If a credit union is currently managing a handful of originators, imagine being able to increase volume, clients and revenue, without impacting the workload. If you're on the fence about executing your business services strategy, remember – the right tools can make the prospect less frightening and the process more profitable. Be proactive!

Brad Johnson is the Director of Solutions Consulting at Centrix Solutions, a Q2 Company. He can be reached at brad.johnson@q2ebanking.com.

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ACH Considerations for Expanding Business Services

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