ORLANDO — Information-heavy transaction formats could revive growth on the automated clearing house network.
With some of the fastest-growing ACH formats now maturing and the economy slumping, new types of electronic transactions, including business-to-business payments and a bill-payment system performing well in tests, could boost volume, though perhaps not in the near future, industry observers said.
"We're not going to have double-digit growth this year," said Rossana Salaris, a senior vice president at The Clearing House Payments Co. LLC of New York, which operates one of the two ACH networks.
However, applications that incorporate information such as the purpose of the payment could make the established ACH network more useful, she said. "There's an opportunity out there to make the pie bigger."
Nacha, the electronic payments association, said Monday during its annual conference here that the number of ACH transactions rose 6.9% last year, to 18.3 billion — a significant slowdown from the 13.2% growth in 2007.
The Electronic Billing Information Delivery Service, which the Herndon, Va., trade group started testing a year ago, is one promising avenue, according to Christopher Huppert, a senior vice president at Wells Fargo & Co. The service uses the ACH network to deliver monthly bills to consumers, who can pay the bills via ACH.
Wells Fargo began presenting these electronic bills last year in a test with Verizon Communications Inc.; JPMorgan Chase & Co. is the biller's bank.
Verizon's goal is to present 50% of its monthly statements as e-bills by 2012. "We want e-billing to be as ubiquitous as direct deposit is," Huppert said. "Particularly with our younger customers, this is the way they want to bank."
Rob Unger, Nacha's senior director of network services, said the association wants more participants to test the service, which will remain in the pilot stage for at least another year.
Electronic bill presentment is not just for the industry's giants, Unger said, noting that the $5.8 billion-asset Dollar Bank, a Pittsburgh thrift, also is presenting Verizon's e-bills to customers. "Here is a smaller bank that has never offered e-bills to its customers, and they are up and live."
He said Fidelity National Information Services Inc., iPay Technologies LLC and Yodlee Inc. are planning to test the service. "They like the model. They think it will be a good value over time, but they need to hear from their customers before they make that investment."
According to Unger, the service generates additional traffic on the network in several ways. Consumers enroll over the ACH network using the ENR format, which is now used primarily by Social Security recipients to sign up for direct deposit. Monthly bill summaries are delivered using the CTX format for corporate trade exchange, which was designed for businesses paying multiple invoices with a single payment. Payments are sent with the CIE (consumer initiated entry) format.
In addition to e-bills, Salaris said, businesses could make better use of the ACH network.
In particular, she promoted The Clearing House's EPN STP 820 format, a stripped-down version of the electronic data interchange file format that it has offered since 2004. Several vendors now offer the 820 format in their accounting programs, but corporate adoption remains slow, she said.
The Clearing House also is bragging about the 144% growth last year in the use of its universal payment identification code, introduced in 2002. The code lets companies publish numbers their payers can use to initiate credit-push transactions without exposing the biller's banking details. Still, the code was used for just 621 million payments last year.
Richard R. Oliver, an executive vice president at the Federal Reserve Bank of Atlanta and manager of the Federal Reserve Board's Retail Payments Office, said considerable growth potential remains in traditional ACH formats, such as direct deposit.
About a third of workers still do not receive direct deposit, most of them hourly workers, he said, because their paychecks are often processed on Thursdays — too late to be deposited electronically for Friday paydays.
To boost usage, the Fed decided to offer same-day ACH in a test starting next year, Oliver said. "The industry needs to do a better job of meeting the needs of the market."
