Payments executives say businesses are trying to reduce their costs by shifting more payments to the ACH system, but these gains have been offset by a sharp decline in check conversion, long a major driver of transaction volume.
While the total number of ACH payments increased slightly last year, according to data released Wednesday by Nacha, the dollar value sent across the network actually fell.
Observers said this dichotomy is a sign that ACH payments have reached most of the easy targets and are now expanding slowly into the more isolated corners of the payments market.
The falling transaction growth rate will hinder revenue growth for banks that originate ACH payments, observers said.
"We're seeing the kind of peak of all the check conversion activity," said Laura Lee Orcutt, a senior vice president and group product manager in the treasury management group at Wells Fargo & Co. "Check conversion itself is going to trail off because there is less check writing by consumers."
Nacha, the electronic payments association, has "successfully gotten a transition from checks toward ACH," said Nancy Atkinson, a senior analyst who focuses on business-to-business payments for the Boston research firm Aite Group LLC.
But as checks go away, "there's less opportunity for this volume to grow," Atkinson said. "It's a natural progression in that sense. In the past, ACH basically still had a huge check volume out there that they could keep focusing on."
Nacha said that 3.06 billion checks were converted into ACH payments last year, down 5.8% from 2008. The dollar value of check conversions fell 13.3%, to $694 billion.
Total ACH volume rose 2.6%, to 18.76 billion transactions, in 2009. That was considerably slower than the 6.9% growth rate in 2008 and 13.2% in 2007.
The dollar value of ACH transactions fell 1.1% in 2009, to $29.64 trillion.
The dollar value covers only payments sent through the ACH network, not "on-us" payments. Nacha does include on-us payments in its overall transaction volume figures using self-reported data from originating banks, which typically do not report the dollar value of these transactions. (On-us payments are those that are originated and received by the same bank.)
Excluding on-us payments, total ACH transaction volume grew 2% last year, to 15.26 billion.
"The fact the network is still increasing is a very positive trend in the down economy," said Janet Estep, Nacha's president and chief executive.
She said that electronic payments are more cost-effective than writing checks, and businesses and government agencies are making efforts to rein in their treasury management expenses by shifting more transactions to the ACH network.
Business-to-business ACH payments increased 3.5%, to 2.06 billion. The value of these transactions slipped 2.2%, to $19.37 trillion, a sign that companies are sending more low-value payments electronically.
ACH payments sent by the federal government increased 5.2%, to 1.21 billion, and the value increased 7%, to $4.29 trillion.
Estep said that there is still headroom in check conversion, especially the back-office conversion format, which enables businesses to convert checks into ACH payments in their item processing centers. BOC volume increased 104.6% in 2009, to 160.5 million transactions.
Orcutt said that Internet-initiated ACH payments are another growth area as more consumers turn to ACH out of convenience and greater familiarity and trust.
The ACH system has also has improved the way it presents billing information, making it easier for consumers to identify specific payments. "Two months later they can look at their checking account statement and say, 'Oh yes, that $200 was to pay the ABC Company,' " Orcutt said.
