What do those descriptors mean and how do you change them?
We've all seen them. Semi-cryptic entries on our bank statements. Sometimes they’re as simple as: `VENMO PAYMENT 1835782906 SAM AARONS` and other times they’re more confusing: `FUNDRISE G 2025840550 A19100 2J5JFW58EZM41A8 SAM AARONS`. We almost never give these entries a second thought. We see familiar company names like Venmo and American Express and remember that we loaned our friends money or paid off our credit cards.
But what about the rest of the entry? The random numbers and letters that follow? Where does that information come from? And more importantly who controls what shows up?
To answer these questions we must first understand the payment systems themselves. For a typical consumer bank account, a majority of the electronic transfers are handled via the Automated Clearing House (ACH). A lot has been written about ACH and more directly NACHA, the standards body that guides how ACH payments are formatted when being sent between banks. Although a standard exists and is widely supported, there is no equivalent agreement for how the payment might appear on a recipient's bank statement.
To be concise, banks often take individual fields from an ACH payment and join them together on a single line to form the entries. Each bank tends to have its own method. What might appear as `AMERICAN EXPRESS ACH PMT 190417 A1110 SAMUEL I AARONS` at one bank would show up as `AMERICAN EXPRESS DES:ACH PMT INDN: SAMUEL I AARONS CO ID: XXX123 PPD` at a different bank.
There are a few fields that always appear (in various forms) on a consumer's bank statement. These are:
- Company Name (16 characters)
- Company Entry Description (10 characters)
- Receiving Individual Name (22 characters)
The appearance of those bits of info is mandated by a combination of Regulation E, which lays out federal guidelines for electronic payments, and NACHA Operating Guidelines, which dictate the need for these fields to be included by all participants of the ACH. Beyond these three fields, some banks will choose to include a small set of other fields that may aid a consumer in tracking down the specific purpose of a payment.
But these other fields often end up adding to the general confusion. Readers of a bank statement must figure out where one field ends and another begins. For Bank of America customers, this task is made easier by the presence of certain tags `DES:`, `INDN:`, `CO ID:` that map to the corresponding ACH "Company Entry Description," "Receiving Individual Name," and "Company Identification" respectively.
For Wells Fargo payments, which lack these helpful indicators, there is a uniform ordering that applies to all payments. Take for example `FUNDRISE G 2025840550 A19100 2J5JFW58EZM41A8 SAM AARONS`. What appears as one giant line is actually 5 fields in the following order: "Company Name," "Company Entry Description," "Company Descriptive Date," "Individual Identification Number," and "Receiving Individual Name."
From the consumer perspective, it's hard to argue that all of these fields are actually helpful. Most are internal identifiers that only make sense in the context of a given system. Modern Treasury will include some of these identifiers for the purposes of handling internal reconciliation and returns.
Given this messiness, it's no wonder that new customers consistently ask us "How can I control what shows up on the recipient's bank statement?" As we've shown, the process can't be controlled entirely but Modern Treasury has developed 3 industry best practices. These help businesses give their customers the most context in their bank statements:
- Always use statement_descriptor when creating a new ACH payment order. statement_descriptor in our platform will always map to the "Company Entry Description" and we've seen nearly all banks surface this field to consumers.
- Use a descriptive "Company Name" during ACH setup. While 16 characters might seem like a lot of information, we often observe that longer names are truncated in confusing ways. Be sure to use a Company Name that is both short and immediately recognizable.
- Use remittance_information when you need more than 10 characters. When creating a new ACH payment order, remittance_information will map to the 80 character "Payment Related Information" field from the NACHA standard. We've only seen this field appear in about 33% of bank accounts so it should be used in conjunction with statement_descriptor.
With these practices in place, businesses can feel confident that their customers will have all the context they need printed cleanly and clearly on their bank statements. For more ways to simplify and streamline your payments, reach out to Modern Treasury.