Defending Against Financial Fraud with ACH Alert

Episode Summary
In this episode of Wrestling Payments, host Joe Casali sits down with Jaime Shapiro Berg from Alkami - ACH Alert to discuss the rapidly changing payments landscape and the critical role of fraud prevention. Jaime shares her extensive career journey, from starting in treasury management at KeyBank to her current role at Alkami, emphasizing the importance of adapting to new technologies and staying ahead of fraudsters.

The conversation highlights the innovative Positive Pay & ACH Reporting solutions provided by Alkami to address the need for automated fraud prevention tools in the financial sector. Jaime explains how Alkami's Positive Pay solutions have evolved to help banks and credit unions combat check and ACH fraud, reducing losses and enhancing customer trust.

Joe and Jaime also dive into the broader challenges facing the banking industry, including the need for better education and training in banking operations and treasury management. They stress the importance of financial institutions investing in comprehensive fraud prevention strategies to protect themselves and their customers in an increasingly digital world.

Guest-at-a-Glance

• Guest: Jaime Shapiro Berg
• What she does: Director - ACH Alert Sales
• Company: Alkami - ACH Alert
• Noteworthy: With over 25 years of experience in the banking and FinTech industries, Jaime Shapiro Berg has a deep understanding of treasury management and fraud prevention. Jaime's background includes transitioning from traditional banking roles to leading innovative solutions in digital banking.
• Where to find Jaime: LinkedIn

Key Insights
Payments Are Rapidly Evolving
The landscape of payments is continuously changing, particularly driven by consumer demands for the latest and most efficient technologies. Consumers always seek the newest and shiniest innovations, pushing businesses to adapt quickly to stay competitive. While businesses also desire cutting-edge solutions, their primary goal remains to generate profit effectively. This dynamic environment necessitates that companies stay updated with technological advancements to meet consumer expectations and achieve their financial objectives.

Fraud Prevention Requires Continuous Innovation
Fraud prevention in the financial sector demands innovative and seamless solutions to combat increasingly sophisticated fraudulent activities. Traditional methods, often manual and error-prone, are no longer sufficient. ACH Alert's Positive Pay solutions automate fraud detection, minimizing human error and resource expenditure. By integrating these automated solutions, financial institutions can significantly enhance their ability to prevent fraud, thus safeguarding their operations and maintaining customer trust.

Education in Banking Operations Is Essential
There is a growing need for comprehensive education and training in banking operations and treasury management. Many financial institutions struggle to hire individuals with relevant experience due to a lack of specialized training programs. Enhancing educational opportunities in these areas can help bridge the skills gap, ensuring that banks have the necessary expertise to manage operations efficiently. Institutions should consider revamping management training programs to focus not just on lending but also on critical areas like treasury and operations management to maintain a robust talent pipeline.

Transcript

NEACH_ Wrestling Payments - episode 2.9
Defending Against Financial Fraud with ACH Alert
Alkami Small Business Month - Jaime Shapiro Berg

Jaime Berg: [00:00:00] One of the things that I see, Joe, is that payments are changing, definitely. I see them personally changing more rapidly when it comes to consumers, because consumers always want the best. They want the newest and the shiniest things. For businesses, they want a lot of the shiny things, but their goal is to make money. It's to make money doing what they do.

Joe Casali: Hi, and welcome to Wrestling Payments. Today, I have a guest. The guest is Jaime Berg. Jaime, I know you from a long time ago, but can you introduce your title and a little bit of the journey and where you are now?

Jaime Berg: Sure. Thanks, Joe. Yeah, we do know each other from a long time ago. I started my career over 25 years ago. I don't want to really age myself. I started as a treasury management or cash management trainee at KeyBank right out of college. That was unheard of back then. Everybody was going to be a commercial lender, but then there was me. I did operations as a management trainee. It was a little uncommon. I probably got to know you years ago through Niche. I was at Key Bank for about nine years, then journeyed over to my family business. I went from the backside of the banking world to the front end of being the customer, which was really interesting. Unfortunately, or fortunately, the family business was sold, and I went back to working for a FinTech. I went to work for a company out of Maine called Fisk. They did backroom processing for banks and also lockbox processing. I was there for a little bit, and then one of my clients recruited me. I was at Bangor Savings for about nine years and managed product sales and support for treasury management. I decided it was time for a career change and ended up going to work for ACH Alert. They were actually one of my vendors that I had selected years ago that I got to know through my friends at Bank of Oklahoma and TCF. Over the years, I've seen large corporate banking, been a customer of a bank, and now I'm in FinTech. I've seen a lot of different things over the years. People laugh because my degree is in accounting, and they say, "You were an accounting major? You like to talk too much." ACH Alert was acquired by Alchemy about four years ago, and here I am at Alchemy. Today, I am the director of ACH Alerts and also for the sales team and account management. I'm excited to be here today talking to you about payments.

Joe Casali: I start off with a base. Your opening gave me so many questions to ask, so I'm going to start close to the subject. ACH Alert, we at NEACH were familiar with ACH Alert. They came up with a really good product that we're going to talk about. How would you describe Alchemy? Are they more than a FinTech? I always thought of them as the internet. Am I wrong?

Jaime Berg: Alchemy started offering digital banking in the credit union space. They have expanded over the years and now offer digital banking to banks all across the country. They have made several acquisitions over the last four or five years. We were one of the first acquisitions, being ACH Alert. They also purchased a company that did online account opening. The last acquisition was a company called Segment that does data and marketing analytics. It's a really interesting journey, and it all fits with digital banking and helps banks and credit unions expand, allowing them to buy most of their products from one vendor if they choose.

Joe Casali: That's really interesting. I don't know them well, but it sounds like they were making the right moves. Data wasn't big maybe 10 years ago, but it's everywhere now with mining and AI and what you need for data. If I was going to invest, which I'm not an investor, please don't take investment advice from me, it sounds like they're making the right moves in digital banking. I want to take a little side trip. One of the things NEACH is doing here is NEACH U. It's a new approach. We're really organized around topics like compliance, risk, and treasury. Rather than offering courses people were asking for in the past, we're now asking what the whole program looks like? One of our strategies is to get into colleges. I know there's leadership banking programs that collaborate with colleges, but you mentioned you went into a management program for treasury, and you had a coworker that went into operations. Any thoughts around that strategy? I have a dream of introducing payment operations and payments to the college community. When you look at their courses, it's all risk management, insurance, a lot of balance sheet stuff, asset stuff. Any thoughts on that?

Jaime Berg: Yeah, I think we're seeing a lot about cybersecurity, but one of the things I see a lot is the lack of ability to hire people with any banking operations background or treasury management experience or education. It's really tricky. It's easier to hire a banker, teller, or someone with an accounting or finance background and teach them treasury because they've got a foundation. It's building blocks on top of that. With operations, people don't know all the regulations, how checks flow, how ACH works, how Zelle works in a bank environment. Management training programs at financial institutions are important, not just to turn out lenders. You only have so many people doing treasury management in our environment, and what you see a lot of is people moving from bank to bank because it's hard to hire experienced people. It's the same in operations. You see a lot of operations management positions because they're not getting trained somewhere else. They're growing up in the industry, and now people are retiring. It's tricky to find replacements. Getting into a college environment is important, and banks should start considering their management training programs again, not just to turn out credit analysts and lenders. You might have 40 of those, but probably only one VP of operations. You've got to keep that experience within the bank and continue to grow it, or you'll be in a hard spot.

Joe Casali: Excellent. I appreciate that feedback. One more question before we get into our real topic today. How did you get into that management program? I don't find people who say they want to be a banker when they grow up. How did you enter that program?

Jaime Berg: It's a funny story. I graduated from the University of Hartford with a BS in accounting. My first job offer was from the IRS in Stamford, Connecticut, and they were going to pay me $16,500. My father said, "That's awesome, but you can't live on $16,500 in Stamford. You may want to look at other positions." My father knew people at KeyBank, and I got an interview. I always say to people, use your resources. It won't get you the job, but it will help you get the interview. Then you're on your own. That's how I got in the program.

Joe Casali: Excellent. So you didn't want to be a banker when you grew up. Go ahead.

Jaime Berg: I did not want to be a banker when I grew up. I didn't know what I wanted to be, but I knew I was not going to work at the IRS for $16,500.

Joe Casali: Why are you still in banking or FinTech?

Jaime Berg: It's fun. I think it's fun. People think I'm crazy, but when you're in FinTech or payments or treasury management, every day is different. You never know what you're going to get or deal with. It makes it interesting. A lot has to do with fraud, losses, and risk. It keeps us on our toes and gives us a lot of variety. I've enjoyed it over the years. It's a space I'm very comfortable in, and I like to educate people because, particularly with fraud, I have a huge passion for it. Long before I came to ACH Alerts and Alchemy, I hated to see the fraudsters win. The banks don't win, the credit unions don't win, and the customers don't win. Only the fraudsters win, and I don't want the criminals to win.

Joe Casali: I agree with you. I didn't mean to be in payments. I love it. I love payments and everything you talked about. With the fraudsters, it's not getting better; it's getting worse. It's a fight. This podcast was intended to be about small businesses and Small Business Month. We may miss Small Business Month at this point from a recording schedule, but ACH Alert is an interesting story. I've been in banking or the association for a long time. You see lots of vendors. Over time, vendors offer big products and solutions that make sense. Then along comes a star, and I think ACH Alert was a star. Can you talk a little about how ACH Alert came to be and what you do there? For me, it was a star even before we were using the word FinTech. They were a star when they came out.

Jaime Berg: The company was founded by Debbie Peace and her husband David. Debbie was an innovator and saw a hole in the market. She was an AAP, very active, and noticed there was something called blocks and filters, but no automated product to help financial institutions eliminate fraudulent transactions with ease of use from a customer experience standpoint. Initially, it was supposed to be consumer-based, but things changed, and it went right to business. One of Debbie's close partners needed a solution, so they started building it. That's how they ended up with an ACH Positive Pay solution. It was designed to be a seamless backend and front-end solution. We're familiar with putting blocks and filters on the core and then communicating that to the customer. Some financial institutions figured out how to use a front-end solution with their backend core, but that required communication. In my case, everything was manual. If something came in that wasn't in the core, we'd reach out to the customer, get an answer, and either pay it, return it, or add it to the core for future transactions. It was a seamless solution like checking positive pay. Debbie initially didn't look at check positive pay because she felt there wasn't a need, but customers wanted a better check positive pay solution. So, they built it, and now it's our biggest growing solution because check fraud continues to grow. Most financial institutions we onboard never had these solutions before.

Joe Casali: I'm channeling my friend and fellow podcaster, Kevin Olson. He would say, "There's a lot to unpack here." For our audience, let's assume they know what we're talking about, but positive pay is a list of everyone you intended to pay. You provide that to the financial institution, and they can stop anything not on that list. ACH was new at the time. Positive pay for checks is common today. You can provide a list of check numbers and amounts, or even the payee and amount. The bank can verify that. When ACH Alert came up, it was new.

Jaime Berg: Oh, absolutely.

Joe Casali: You mentioned the core. When I think of the core, I think of a monster program that does everything in banking. It's set. If you want it to work differently, it takes a lot of effort and money. Even though many institutions use the core, it takes a lot to implement changes. Can you comment on that?

Jaime Berg: Yes. When I refer to doing it manually, it's because you could put a stop payment on an ACH. The core is the system of record at the bank for checking and savings accounts. It's where everything is housed, producing statements and e-statements. Customers would put a stop payment on an ACH, thinking it's a stop check. On NACHA rules, businesses have to renew a stop payment every six months. Some cores allowed certain vendors to debit within limits based on a company ID. If a transaction wasn't on the stop list or approved filter list, operations had to handle it, reach out to the customer, get a response, document it, and update the core. This manual process had room for human error and took resources. Some systems allowed customers to manage transactions digitally, but it was still manual. Debbie designed a solution that didn't require the core or digital banking, just her solution with an SSO. It automated the process and put the customer in control. Customers love it because they want one point of action and to move on with their day.

Joe Casali: Absolutely. Sean, CEO of NEACH, recently asked what problems in payments are happening. His first market intelligence survey is on positive pay. Check fraud has increased recently, with people stealing mail and washing checks. Positive pay is seen as hard, but it's not. It's just a series of steps. We're doing a survey to see what's working, what's not, and the obstacles. It's interesting and timely. ACH Alert's positive pay product is how old?

Jaime Berg: The ACH solution came out in 2010, so it's 14 years old. The check solution is probably seven or eight years old. To your point, people think it's hard until they start doing it. It's a lot harder when you have fraud. If you have to close an account, it's a nightmare for a business. Notifying vendors, getting new check stock, reprogramming credit card processing, and managing wires is a lot of work. Customers are concerned about validating banking information changes to avoid fraud. It's a headache, but having these solutions in place prevents fraud. It's like insurance. You have it to protect yourself.

Joe Casali: When you talk about your product with clients, are you talking to companies or just financial institutions?

Jaime Berg: Just financial institutions, mainly banks.

Joe Casali: We have a visitor. Who's the visitor?

Jaime Berg: The visitor's name is Bailey. He's visiting for the week.

Joe Casali: For the listeners, Bailey is a dog. He's perking up every time we say his name. So, changing a bank account is a lot of work. Businesses think they're consumers. When they hear a fraudulent check was cashed, they think it's a mistake and ask for their money back. But there are different laws for businesses. Can you comment on that?

Jaime Berg: You're right. Businesses act like consumers, but the rules are different. It's the bank's responsibility to educate their customers about their protections. Businesses need to understand they're not consumers, and their protections are different. Solutions like check and ACH positive pay are attractive because they're preventative. Educating customers about their protections is crucial.

Joe Casali: When we teach, we give an example of credit risk. If a company gives a payroll file, and the next day they go bankrupt, those transactions can be reversed. During good economic times, bankruptcies are rare, but during downturns, they happen. Mistakenly sending out a bunch of webs can result in returns. People think the banks are the bad guys, but these are the rules. If a web is returned, the bank has to accept it. These are some challenges.

Jaime Berg: Totally agree. It's important to educate customers about the rules and their protections. Using the right transcode is essential. If you send a PPD debit to a business, they can return it for up to 60 days. Educating customers helps them understand their protections.

Joe Casali: When interest rates and economies change, bankruptcies happen. Companies need to understand the rules and protections. Banks are not the bad guys; they're following the rules.

Jaime Berg: Exactly. Educating customers is vital. The new recommendation about adding language to websites to prevent fraudulent returns is helpful. It's a legal document, and customers need to understand that.

Joe Casali: Banks are not the bad guys. These are the laws. Excellent. I want to wrap up the episode. Any final thoughts?

Jaime Berg: ACH Alert continues to be a star. Through the acquisition by Alchemy, we help financial institutions protect themselves and their customers. Educating customers about our products' value and benefits is essential. These products are not automatic; they need marketing to customers. As payments change, businesses always seem to be behind in adoption because of where they spend their resources. This is why we continue to see check fraud and ACH fraud. We'll continue to be the star as long as we're stopping fraudsters. The goal is to stop the fraudsters from winning and help businesses and financial institutions grow and reduce losses.

Joe Casali: Fighting check fraud and payments fraud is a battle happening in banks and businesses. Check fraud hasn't declined as much as checks themselves. Companies need positive pay. It's an easy process, just a series of steps. It's a battle against fraud.

Jaime Berg: It's not if a business will have fraud, it's when. 80% of businesses have had fraud or attempted fraud. It's important to be protected.

Joe Casali: Thank you for joining me. This was really interesting. I enjoy podcasting because we have great conversations. Thank you.

Jaime Berg: Thank you, Joe.