Bigger Volume Jumps Are in Store for BOC E-Checks, NACHA Says

It grew 267% in just one quarter, yet the new back-office conversion (BOC) electronic-check code still isn't getting any respect. But it will, according to officials at NACHA, governing body of the automated clearing house network. NACHA reports that the ACH handled 3.08 million BOC transactions in 2007's fourth quarter compared with 840,743 in the third. BOC allows merchants to convert checks to electronic files in the back offices of their stores or by sending them to processor sites. As such, BOC, which only went live on March 16, 2007, has some advantages over POP, for point-of-purchase, an earlier retail e-check code that has more stringent customer-notification requirements and needs hardware out in the store lanes. Many observers had expected that national retailers would have made some splashy BOC announcements by now, but few have (Digital Transactions News, March 24). “It seems like a lot of people are expressing disappointment in those [fourth-quarter] numbers,” says Dan Miner, senior director of check electronification at Herndon, Va.-based NACHA. “People had asked for forecasts, we weren't able to give any.” The issue, according to Miner, was that retrofitting retail payment systems is a complicated task, and the banks and processors that merchants work with didn't have everything ready last year even though the code was live. “We weren't really surprised about the numbers in 2007,” he says. But Miner is certain that's about to change, especially with big retailers such as Target Corp., The Home Depot Inc., and Kohl's Corp. having publicly committed to BOC. “I do still expect the volume growth will be significant in 2008, but especially in 2009 and 2010,” he says. Meanwhile, POP continues to barrel along on a growth spurt that started in the second quarter of 2006 (Digital Transactions News, Sept. 13, 2006). POP's full-year 2007 volume was 462.7 million transactions, up 71.8% from 269.4 million in 2006?the highest growth rate of 13 ACH payment codes. POP's growth rate in 2006 was 60.3%. Wal-Mart Stores Inc. is by far POP's biggest proponent, with more than 3,000 U.S. stores now using it. But other retailers are implementing POP, including automobile parts retailer AutoZone Inc., according to Miner. The biggest of the e-check options remains ARC, for accounts receivable conversion, or conversion of checks sent to lockboxes. ARC volume grew 24.2% in 2007 to 2.67 billion transactions from 2.15 billion in 2006. WEB, for Internet-based check conversions, grew 27.2% to 1.74 billion transactions compared with 1.37 billion in 2006. WEB is primarily for bill payments over the Internet, with credit card issuers being the biggest group of payment receivers. Less than 3% of WEB's volume is for one-time payments to Internet retailers, according to Mike Herd, NACHA's managing director for ACH network rules. NACHA is addressing Internet retail payments with its upcoming Secure Vault Payments project. TEL, the e-check code for telephone-based check conversions, recorded 334.1 million transactions last year, up 13.9% from 293.3 million in 2006. Total ACH network volume last year was 14 billion transactions, up 13.4% from 12.3 billion in 2006. The figures do not include on-us volumes.