Penny transactions, smoke testing, micro-entries, small value testing, and penny drop testing are a few of the names applied to the type of transaction used to test the validity of a bank account by depositing a small amount of money.

The Nacha Operating Rules (ACH rules) define the term Micro-Entry to mean,

A credit or debit Entry used by an Originator for the purpose of verifying a Receiver’s account or an individual’s access to an account.

As account validation goes, the Micro-Entry process works! Challenges emerge when an ACH participant believes that account validation equals authorization. Specific to ACH transactions, every debit entry must be properly authorized by the Originator and the Receiver. Just because a person can complete the Micro-Entry validation process does not make that person a Receiver.

Click the Read More button below to read the complete blog article from Michael Jeffcoat, Director, Strategic Innovation.