The U.S. payments landscape is evolving rapidly. Electronic payments are quickly becoming the standard for transmitting funds in real estate transactions. This trend has only accelerated as a result of COVID-19 and related social distancing measures.
Consumers deserve additional options for sending secure electronic payment, especially when making payments for one of the largest transactions of their lives – buying a home. Earnnest is leading the industry with electronic payments specifically designed to protect consumers, escrow holders and real estate professionals.
Purchasing a home is a significant event for Americans and should be a positive experience. Unfortunately, wire fraud in real estate transactions is one of the fastest-growing cybercrimes in the United States. The Consumer Financial Protection Bureau found that attempts at diverting real estate funds by fraudsters engaging in targeted spear-phishing or otherwise changing wire instructions at the last minute increased by 1,100% between 2015 and 2017, with an estimated unrecovered loss of nearly $1 billion in real estate transaction costs during 2017 alone. Additionally, with banks across the country continuing to keep lobbies closed or operating at significantly reduced capacity, homebuyers are not receiving the essential guidance from their bankers on best practices for spotting and avoiding wire fraud schemes.
The Automated Clearing House (“ACH”) network is the preferred payment network of the federal government and processes 82% of payments in the U.S. by dollar amount. Simply put, it is the most-trusted payment network in the country. Until now, the ACH has not been a highly leveraged network in the real estate industry due to its inherent consumer protections that prohibit funds received through an ACH from being considered “good funds” for the sake of a real estate transaction.
Earnnest has developed a proprietary, new process using the ACH network. This process protects homebuyers. It also addresses the lack of new solutions designed to provide homebuyers with trustworthy electronic payment options and ensures real estate professionals can consider such funds as “good funds.” The Earnnest process not only meets the needs of existing NACHA guidelines for consumer protection but also completely blocks unilateral pullbacks of deposited funds.
This illustration provides clear insights into how the Earnnest process works:
- When the consumer originates a payment via the Earnnest network, their originating account balance is checked to ensure funds are available before the transfer is initiated.
- Earnnest utilizes Next-Day and Same-Day ACH, halving the processing time of the average ACH.
- Even when making this shift, Earnnest never holds the funds. The originating ACH file ID is maintained throughout the process.
- Earnnest provides traceability and automated notifications when money is initiated and received. Not only that, but Earnnest provides reconciliation details (payer’s last name, property address and unique tracking information) all the way down to your bank account details by populating the memo field on all payments.
To ensure a truly secure process, Earnnest utilizes identity checks and bank account verification processes to limit payments within their proprietary ACH network to only those that have been fully verified. Earnnest never stores the user's account and routing details and never requires the sender to enter the Escrow Holder’s account information. This process eliminates the ability for funds to be redirected to a bad actor's account. When a consumer is requested to pay, the details and relationships of the transaction are a hard-coded aspect of the payment. Once a request is sent, no changes to the receiving account can be made.
In an environment where real estate is a focus for financial fraud and bad actors scam thousands of people a year, Earnnest users can confidently complete payments knowing they are utilizing best-in-class security as a part of the largest, most secure, digital “good funds” network available in real estate today.