Return Rates on ARC Dropping Even As Volume Soars, NACHA Says

Return rates on accounts receivable check conversions are dropping despite the rapid clip at which the volume of these electronic payments is climbing, new data from the National Automated Clearing House indicate. The ARC category of ACH debit, created in March 2002, has gone from 5.3 million transactions in the third quarter of 2002 to 266.2 million in the same quarter this year. NACHA estimates that with on-us volume included, ARC volume will hit 1.25 billion in 2004, winning the distinction of reaching 1 billion annual transactions faster than any other ACH payment application. Despite this growth, the return rate on ARC, which refers to the conversion into ACH debits of consumer checks sent to billers' lockboxes, has shrunk to 0.54% in the third quarter from 2.34% in the same period of 2002, according to NACHA statistics. “Not only is ARC the fastest-growing application in the history of the ACH network, it performs better than any other consumer-oriented ACH debit application,” says Elliott C. McEntee, president and chief executive of NACHA, in a statement. To measure the operational impact ARC is having on the financial institutions that hold consumer accounts?receiving depository financial institutions, in ACH parlance?NACHA surveyed 34 RDFIs. Of 31 that responded, one reported customer service issues related to ARC were significant. Of 33 that responded, 27 said they were not concerned about ARC-related customer-service issues. ARC is one of five categories of electronic check introduced by NACHA in recent years, and one of three that converts a paper check into an electronic debit. The other two are POP, which refers to point-of-sale payments, and RCK, which covers returned checks. The heaviest users of ARC are billers such as credit card, mortgage, insurance, and phone companies.