Clearing of automated clearing house payments will soon top check clearing at the Federal Reserve banks, a Fed official said.
The shift has been a long time coming and is another indication that efforts by banks and merchants to dissuade people from writing paper checks have been working, and that systems for converting checks written into ACH payments have been equally successful.
“Before we reach the end of the year, the ACH monthly volumes will exceed the check monthly volumes,” said Richard R. Oliver, an executive vice president at the Federal Reserve Bank of Atlanta and the manager of the Fed’s Retail Payments Office. “It will represent a milestone.”
Mr. Oliver made the prediction during a reception last week at the Nacha Payments 2007 conference in Chicago and confirmed it in an interview Friday, when he clarified that the check figure included both paper checks and check images, which now account for more than a quarter of the Fed’s forward presentments.
In 2006 the Fed cleared 9.2 billion ACH transactions, whose volume has been rising steadily for years, and 11.1 billion checks, whose volume has been declining since 2001.
Mr. Oliver would not provide the central bank’s monthly volume figures, which he said were “competitive information.”
He attributed the shift in large part to systems that turn checks into ACH payments, such as accounts receivable conversion at the retail lockbox. A new format, back-office conversion at merchant locations, took effect in March, and though it has not had widespread adoption, it could become a significant format this year.
“By far the biggest factor in ACH growth in the recent past has been converted checks,” Mr. Oliver said.
His numbers include only the checks and ACH payments handled by the Fed; industrywide, check volumes are probably still double those of ACH, he said.
The Fed is compiling a payments volume report that should be available in late 2007. Mr. Oliver said it will show that about 30 billion checks were cleared in the United States last year.
Nacha, the electronic payments association, reported last week that there were nearly 16 billion ACH transactions in 2006, including 2.8 billion checks converted using the ARC format.
The last such study by the Fed, covering 2003, found that banks processed 36.7 billion checks. Electronic transactions, including ACH, credit cards, and debit cards, totaled 44.5 billion.
Nacha put nationwide ACH volume at 10 billion for 2003.
Another factor in the Fed’s falling check volume is the growing variety of settlement alternatives available through private image-exchange networks.
Viewpointe Archive Services LLC said in March that its five owner banks were clearing nearly 100% of their mutual volume through its shared check archive, or 2.1 billion images for the year based on the March volume. Those transactions settle through the National Clearing House Association.
The NCHA, of Dallas, also provides settlement services for the more than 4,000 small banks that use the Endpoint Exchange Network operated by Metavante Corp., the technology subsidiary of the Milwaukee banking company Marshall & Ilsley Corp.
And The Clearing House Payments Co. LLC said this month that 18 big-bank customers used its SVPCO Image Payments Network to clear 177.4 million items in March.
That would project to 2.1 billion payments for the year. SVPCO sent 16% of its total to the Fed, about 28.4 million images.
