Reserve Account
Overview
Unit requires that you maintain a Reserve Account to cover disputes and cases of negative balances resulting from End User activities, as explained in our Disputes Guide.
Unit helps you protect yourself from losses by utilizing industry-leading tools, built-in controls and additional fraud prevention layers at the customer level and transaction level.
Nevertheless, losses due to disputes and fraud are part of any banking product. Key examples, such as ACH Debit origination return, are described under "Risks" in our Fraud & Disputes Guide. You are solely liable for dispute and fraud losses. In the case of a dispute or a negative balance, debit your reserve account to cover the negative balance, resulting in a loss.
In addition to the tooling offered by Unit, depending on the nature of your use case and your risk profile, you might want to consider using additional. The use of additional fraud tools is subject to Unit and bank approval, and we recommend reaching out to our Risk & Fraud team prior to integrating any new third party tools.Like your Revenue Account, your Reserve Account is a type of organization account. Its balance and all transactions are available in your Unit Dashboard on a real-time basis.
Your Reserve Account Balance
Minimum balance
The Reserve requirement is based on your loss exposure. It takes into account previous track record (when available) and potential risk exposure based on your customers activity.
It's important to note, that the minimum balance required at any given time in your reserve account is the reserve requirement. When funds from the reserve account are used to cover losses, you will be required to fund the account back to the minimum balance within 2 business days.
We recommend maintaining a reserve balance higher than the minimum reserve requirement. This will make it easier for you to monitor and manage, so you will not have to fund following every new dispute or fraud case.
Ongoing balance & formula
Once you’re live, we will use your actual transaction volumes and actual risk ratio to recalculate the required balance on a monthly basis. In the case of rapid growth in your volumes, we may recalculate the required balance more frequently.
The formula is based on a combination of components:
- Daily/Monthly limits for debit card purchase, originated ACH debit and check deposits
- Utilization rates (volumes) for debit card purchase, originated ACH debit and check deposits
- Return/Dispute rates
- Number of active accounts
- Number of accounts closed for fraud
- Risk profile, based on additional risk parameters Unit or the bank identifies (i.e very high limits, short clearing periods)
Unit has the right to change reserve requirements based on fraud loss risk. If the “available reserve” is decreasing due to accounts in negative balance, you will be asked to add funds to ensure your reserve account is properly funded.
Failure to top up your account when required is a material breach of your agreement with Unit and your bank partner and may result in restricted access to the Unit platform in addition to other remedies under the agreement.
Operational usage of the reserve account:
- When an account is closed with a negative balance, it will be automatically covered from the reserve account.
- Unit will automatically close an account with a negative balance after 60 days. We will use the reserve amount to cover the negative balance.
Reserve Account Formula
| Number of active accounts X Monthly card limit X Utilization rate X Dispute rate + Number of active accounts X Monthly ACH debit limit X Utilization rate X Return rate + Number of active accounts X Monthly check limit X Utilization rate X Return rate + Risk Profile |
|---|
Reserve Account Minimum Required Balance
The minimum required balance for your reserve accounts is determined by the highest of the following:
- The reserve account formula outcome (as calculated above)
- 75% of the daily originated ACH debit limit
- 75% of the daily check deposit limit
- 75% of the daily purchase debit card limit
- $30,000