How should a startup evaluate and negotiate an ACH reversal reserve?

I would ask the provider to explain how the reserve relates to the transaction volume and the risk it is covering. A large upfront deposit can tie up capital a startup needs to operate, but the provider also needs protection if funds must be returned after a payout has already occurred.

First, clarify the terminology. An ACH reversal corrects certain processing errors; a returned debit can arise for other reasons, including insufficient funds or an authorization dispute. The reserve discussion should identify the actual exposure. Nacha’s reversal guidance explains the narrower meaning of a reversal.

My suggested negotiating approach is a smaller initial reserve with a clearly defined replenishment mechanism. Instead of agreeing to a large amount without explanation, propose a starting amount tied to the expected activity, with an additional deposit triggered when the remaining protection falls below an agreed level.

The amount must be tested against transaction sizes, potential losses, settlement timing, and how quickly you can replenish it. Monthly volume alone does not establish that a reserve is adequate. The OCC explains that an originating bank’s ACH debit exposure can continue after funds become available, until the debit can no longer be returned. OCC ACH risk-management guidance.

Put the starting reserve, replenishment trigger, and review process in writing. My point is to negotiate protection proportionate to the business’s risk. A smaller reserve is a proposal to substantiate with the provider, not an assurance that a particular dollar amount will cover every startup.