Growth of automated clearing house transaction volume fell to single digits last year as the recession slowed payments activities and electronic check formats matured.
The big banks that posted significant gains in origination did so largely because of consolidation, and bankers said their top ACH goals for this year include preparing for the IAT international transaction format that takes effect in September, improving transaction quality and reducing fraud.
Janet O. Estep, the president and chief executive officer of Nacha, the electronic payments association, said the slumping economy is hindering the use of ACH.
"I was in a meeting the other day where an individual said, 'Flat is the new up,' " Estep said in an interview last week to discuss Nacha's annual report on ACH activity, which is to be released today as the Herndon, Va., trade group convenes its annual payments conference, in Orlando.
Overall ACH volume rose 6.9%, to 18.3 billion transactions, Nacha said, versus 13.2% growth in 2007. The group changed its methodology this year, adding in off-network volume such as on-us transactions and direct sends between banks.
The value of ACH payments rose 4%, to $29.96 trillion.
JPMorgan Chase & Co. retained its position as the top originator, but other big players moved.
Wells Fargo & Co., which was the No. 3 originator in 2007, acquired last year the No. 4 company Wachovia Corp., giving Wells a 134.3% surge in originations and putting it in second place, ahead of last year's No. 2, Bank of America Corp.
Keith Theisen, a senior vice president in Wells' treasury management unit, said that, even apart from the purchase, Wells had a big year, with growth above 30%.
"It's been one of the best years for ACH I've seen in my 35 years at Wells Fargo," Theisen said. Even accounts receivable conversion, largely flat industrywide, grew 20%, which he attributed in part to the company's smart decisioning service, which can determine whether check images are eligible for the ARC format or should be cleared as checks images.
At JPMorgan Chase, the nation's largest originator, ACH volume rose just 2.7%. Pat Thelen, the executive director of ACH and global check deposit products for JPMorgan Treasury Services, said the slow growth was less a result of the economy than the fact that "the business has matured."
JPMorgan Chase has stepped up its fraud and data security efforts in the past year, with real-time fraud monitoring, he said.
Bank of America Corp. fell one notch in originations, though its ACH volume grew 9.8%.
Robert W. Johnston, Bank of America's product executive for check and ACH, said the Charlotte company is focusing on IAT.
"The impact to the banks is enormous," Johnston said. "This is probably the largest change ever being introduced by Nacha."
Though IAT is designed chiefly to enable U.S. banks to receive ACH payments from abroad — by checking the payments' initiators and beneficiaries as required by the U.S. Office of Foreign Asset Control — the impact could be much broader, Johnston said.
"The IAT rules, what OFAC wants you to scan for, could introduce huge volumes," he said. The format could also apply to domestic transactions, if the cash for the transaction is wired in from a non-American bank, he said.
Several banks posted declines.
At the No. 48 originator, First Citizens BancShares Inc., ACH volume fell 12.8%. Denton Lee, a group vice president at First Citizens and its manager of business and treasury services, said the decline in volume, including payment by checks and cards, has been "pretty dramatic, especially since November. We wondered if we were unique. We are not."
However, Dennis Feterl, a vice president in treasury services at First Premier Bank, a subsidiary of United National Corp., said the economy was not the reason for the 16.5% decline at his bank, the No. 33 originator. "It was natural attrition and the loss of a couple of our large clients," he said. "They were acquired, and their ACH business went" to the acquirers' banks.
Volume fell 15% for No. 5 originator, SunTrust Banks Inc., which operates primarily in the Southeast and has been hit particularly hard by the economic slump. Volume at the prominent credit card issuer Capital One Financial Corp., the No. 10 originator, fell 11.7%.
Credit card and mortgage processors were among the biggest users of Nacha's ARC format, used to convert check payments to ACH at the retail lockbox. Since the ARC format went into effect March 2002, it has had robust growth and become the second-largest ACH category after direct deposit of payroll.
Several bankers said the ARC format has now matured and is unlikely to return to skyrocketing growth. In fact, quarterly reports from Nacha showed ARC, which registered 23.4% growth in 2007, was off markedly in 2008, corresponding to the slowdown in the economy. After growing 5.03% in the first quarter compared with a year earlier, ARC volume grew just 2.67% in the second quarter. Volume fell, 0.3% in the third quarter and 5.24% in the fourth quarter.
Steve Stone, a senior vice president in treasury management operations at the PNC Bank unit of PNC Financial Services Group Inc. of Pittsburgh, said that the complexities of check conversion probably would outweigh the financial gain for billers that have not adopted ARC already to gain the advantages of least cost routing or faster availability.
"For most companies making check deposits, least-cost routing is probably not worth the additional cost involved," Stone said. "Unless you're a high-volume depositor, the savings don't amount to a whole lot of money."
Nacha pointed to some bright spots, including online payments, business-to-business and back-office conversion. Estep said the public is becoming more comfortable with online commerce, such as authorizing automated debits for recurring payments and using online bill-pay services to push payments electronically to billers.
"People across the board realize they don't have to use paper any longer."