At Conduit, we know there are some elements that make Automated Clearing House (ACH) transfers safer at the margins when compared to wires, because they are slower and “technically” reversible. However, ACH transfers often get less attention at companies, so are behaviorally more dangerous because they are believed to be safer! Criminals don’t care and will use the same social engineering playbook against both wire and ACH transfers.
In our experience, ACH and Wire payments should be equally vetted by your firm’s verification process.
A wire transfer is a direct bank-to-bank transfer of funds. Wire transfers are typically used for large sums of money and usually take place within one business day. The main benefit of a wire transfer is that it’s a very quick way to send money and your counter-party knows it’s final.
The downside of wire transfers is that they can be expensive. Banks typically charge a fee for outgoing wire transfers, and the recipient’s bank may also charge a fee. Additionally, wire transfers are not reversible, so if you make a mistake when sending the money, it is extremely difficult to retrieve. The recipient has access to those funds immediately. If the recipient is a criminal, the funds will be immediately moved to foreign jurisdictions or crypto wallets, making it all but impossible to recover.
ACH transfers are like wire transfers, but they’re not quite as fast. An ACH transfer typically takes one to two business days to process. The main benefit of an ACH transfer is that they’re less expensive than wire transfers. Banks typically charge lower fees for ACH transfers, and there’s no fee for incoming transactions.
Another benefit of ACH transfers is that reversing a payment may be possible. If you make a mistake when sending an ACH transfer, you can contact your bank and have them reverse the transaction. This reversibility, however, gives a false sense of security. Criminals who receive socially-engineered fraudulent payments will immediately move the money as soon as it is available. Many victims of fraud via ACH know all too well the answer when they look to reverse the transfer: Insufficient Funds. Once the funds are moved out of the account there is nothing to claw back.
When to use an ACH or wire? Wire transfers are typically used in situations where time and finality are of the essence. For example, when buying a house, the buyer will wire the purchase price on closing day. On the other hand, ACH transfers may be used for a variety of purposes including direct deposit of paychecks and automatic bill payments; however, because ACH transfers can take several days to process.
Which is safer? Both types of transfers are secure if you properly verify the destination account numbers. In some instances, we’ve found ACHs tend to be vetted with a less rigorous process and with fewer eyes on them, because of the perception they can be reversed. As stated above, victims of socially engineered fraud quickly learn that although an ACH transfer can be reversed, unless the crime is caught immediately, the criminals have already withdrawn or moved the funds to other accounts.
The way to secure a payment is to think about the verification process BEFORE you send it, not relying on one type of transfer or another.