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The Latest Numbers Herald Checks’ Electronic Future
December 18, 2012


New data from the automated clearing house network show that ACH debit transactions for online bill payments grew 9% in the third quarter while paper checks converted into ACH transactions after being mailed to lockboxes decreased by 8%.

The story behind the interrelated numbers boils down to the years-long switch by consumers to electronic forms of paying with their checking accounts, according to Mike Herd, managing director of ACH Network Rules at NACHA—The Electronic Payments Association, the ACH’s governing body.

WEB is the ACH code for online consumer debits, typically from bill-payment sites. Third-quarter volume hit 732.5 million transactions versus 672.2 million a year earlier.

In contrast, ARC (accounts-receivable conversion), the code for paper checks converted into ACH transactions after being mailed to a lockbox, saw its volume slip to 455.3 million transactions from 495.2 million in 2011’s third quarter.

CIE (customer-initiated entry), another code for bill-payment transactions but which generates an ACH credit, saw its volume increase 5% to 41.4 million transactions.

“The ongoing story continues to be consumers are writing fewer checks and are making more transactions online,” says Herd. “We think a good amount of the WEB volume has displaced ARC volumes and a good amount of checks for bill payments that weren’t converted [to ACH transactions].”

In addition to bill payments, consumers continued to write fewer checks at the point of sale, according to data for two codes for converting paper checks written by customers in stores. The point-of-purchase (POP) code’s volume slipped 8% to 111 million transactions. Volume under the BOC (back-office conversion) code fell 9% to 46.5 million.

TEL, the code for telephone-based ACH payments, declined 6% to 86.3 million transactions, but Herd says it’s too soon to say if TEL has entered a long-term decline. TEL’s volume for all of 2011 increased nearly 4%.

One of the biggest third-quarter gainers among the ACH codes was IAT (international ACH transaction), whose volume jumped 13% to 10.8 million transactions. Herndon, Va.-based NACHA created the code in September 2009 to facilitate smoother cross-border ACH transactions. IAT can be used for remittances, pension payments to American retirees who’ve moved abroad, salary payments to foreign-based workers, and other transactions, and both consumers and businesses can initiate them. Herd says many banks and other companies are still working on integrating IAT payments into their businesses, so he expects growth to continue.

“There are lots of different use cases,” he says.

Meanwhile, NACHA expects that volume under a business-to-business code, CCD+ (for cash concentration or disbursement) will increase once its new rule for health-care payments takes effect next Sept. 20. The rule attempts to bring standardization to ACH credit payments and remittances associated with claims paid by medical insurers to health-care providers. The health-care industry already can process transactions under the code, but Herd says “we have reason to believe those will ramp up” once the new rule is in place and insurers and providers learn how it could make their payment systems more efficient.


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