Tuesday, April 28, 2015
The ACH is an electronic payment system that operates in a batch mode and can accommodate both credit and debit transactions. NACHA is a private sector group, made up of banks and corporations, that is responsible for managing ACH development and rules processes.
When the ACH was created in 1974, it was expected to serve as an electronic replacement for checks. The ACH has never quite lived up to that expectation, however. In fact, annual ACH payment volumes only began to rival check volumes a few years ago.
About half of all transactions sent via the ACH are recurring payments. Direct deposit transactions, the single largest category of recurring payments, grew by 3.6 percent last year, NACHA reported. Recurring debits can also be sent via the ACH; these often are used to effect recurring bill payments.
Direct debits aren't an option for the 40 million-plus million Americans the Federal Deposit Insurance Corp. classifies as unbanked, however. And direct deposit isn't an option for millions of workers, especially those employed by small businesses that can't or won't adapt to ACH processing schedules. (It takes at least two days to process an ACH payment.) So for about the last 15 years much of the growth in ACH volumes has been driven by newer electronic payment applications, such as online and business-to-business (B2B) payments.
"The ACH network has continually added capabilities over its history to enable a host of electronic payments, such as payroll, bill payments, business payments, online and mobile payments, international payments, and a variety of others," said NACHA President and Chief Executive Officer Janet O. Estep.
WEB transactions, which is what NACHA calls credit and debit payments initiated and authorized via the Internet, are a huge driver, accounting for almost 20 percent of ACH network volume. Last year, WEB payments grew 10.2 percent to total 3.6 billion and included 7.4 million person-to-person (P2P) payments, NACHA said. P2P payments via the ACH became possible under a NACHA rules change that took effect in March 2014.
"Clearly the trend is moving towards more and more online payments, as these types of payments, like the ACH network, provide choice, flexibility and convenience for consumers," Estep said. "Continued development and implementation of rules that support the changing needs of the industry will help ensure financial institutions remain at the center of payments and continue to meet the needs of today's and tomorrow's consumers."
The ACH carried 2.7 billion B2B payments in 2014, an increase of 7.3 percent over 2013, including 149 million healthcare payments, NACHA said. The volume of addenda records (typically invoice numbers) associated with B2B payments grew as well, by 7.7 percent. One of the biggest hurdles to using the ACH for B2B payments has been the limited amount of information that can be accommodated in addenda records. Meanwhile, use of the ACH to "electronify" checks continues to fall, as consumers and businesses alike embrace more convenient methods such as using smartphone cameras to deposit checks (mobile check deposit). Transaction volumes were down for each of the three primary ACH formats that are used for this purpose – POP (for POS check conversion) BOC (back-office conversion) and ARC (accounts receivables check conversion). POP transactions, for example, fell 11.46 percent for the fourth quarter of 2014 compared with 2013.
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