Covid-Fighting Stimulus Programs Help Deliver an Unexpected Growth Surge for the ACH

Thanks to federal programs to deliver stimulus funds to businesses and individuals, the second-quarter slowdown automated clearing house governing body Nacha expected due to Covid-19 didn’t happen. In fact, the massive ACH network saw year-over-year growth in the April-through-June quarter of 7.9%, Nacha reported late Wednesday.

The second quarter’s growth rate easily exceeded the first quarter’s 7.1% growth as well as the 7.4% rate the network posted for all of 2019.

During the quarter, Congress enacted programs that put cash in the hands of consumers to help fight the effects of business shut-downs and stay-at-home orders meant to fight the spread of Covid-19. It also created the Paycheck Protection Program to make forgivable loans to businesses in an effort to keep companies operating and payrolls funded. Much of this stimulus money flowed through the ACH, which saw its payments count soar to 6.6 billion for the three months ended June 30, up from 6.4 billion in the first quarter.

The second-quarter performance stands in stark contrast to what Nacha expected in early April as the stifling impact of the coronavirus pandemic was making itself felt. “While ACH results for the entire first quarter are positive, the current coronavirus national emergency is already impacting payment system volumes, including the ACH,” Jane Larimer, Nacha’s president and chief executive, said at the time.

But the ACH’s direct-deposit service, combined with same-day funds capability, helped drive the unexpected surge in volume through June in the face of the pandemic. “Direct deposit is the best way to reliably deliver pay and assistance to the vast majority of Americans,” Larimer said Wednesday in a statement. “All direct deposits are delivered on time and paid on the intended date. With same-day ACH, urgent direct deposit payments can be initiated and funds made available all within a single day.”

Helping drive same-day payment activity was a move to raise the ceiling on faster payments from $25,000 to $100,000. That quadrupling, which had been widely requested by banks in the network, took effect March 20. Partly as a result of that action, the average dollar total of each same-day transaction rose by one-third in the second quarter compared to the first quarter, Herndon, Va.-based Nacha reported. Same-day transactions, including both credits and debits, totaled 81.6 million for the latest quarter, up fully 36% year-over-year.

Direct-deposit transaction volume, meanwhile, logged a 17% growth rate compared to last year’s second quarter, reaching 2.1 billion payments. By contrast, this category grew 3.9% year-over-year in the first quarter.

Internet and peer-to-peer payments also grew rapidly as a result of the measures adopted by state governments to control Covid-19’s spread, including a patchwork of shelter-in-place orders that kept consumers at home and out of stores. The Internet category saw nearly 16% growth compared to the same quarter last year, to 1.9 billion transactions. By comparison, growth in the first quarter was 14.8%. P2P transactions totaled 52.3 million, up a whopping 48.4%, more than double the first-quarter growth rate.

But the ACH’s check-conversion channels, in which paper checks are converted into electronic payments, suffered a 24% drop overall. Conversions at the point of sale fell about 45%, Nacha reported. Meanwhile, recurring bill payments declined 4% owing to a “disruption to certain types of monthly bills,” Nacha said, including mortgage, rent, and loan payments. Also putting a dent in this category was a move by the federal government to defer tax payments to July 15.