Despite the emergence of new types of transactions, automated clearing house payment’s growth was the slowest in more than 10 years in 2000.

ACH volume rose only 12.4% in 2000, to 6.88 billion, against growth of 14.6% in 1999 and 17.5% in 1998. Nacha, the electronic payments association, which compiled the data, blamed the flagging economy and the maturation of direct deposit, a mainstay of the bank-owned ACH network.

Stephen Devine, senior vice president in charge of cash management at FleetBoston Financial Corp., said, “I’m not surprised that it is slowing a bit.”

Future increases from electronic commerce initiatives such as check truncation and Web-initiated ACH will help the industry offset declines from payment forms that are becoming obsolete, Mr. Devine said.

Direct deposits of regular payouts such as payroll, pension, and retirement distributions rose just 8.75%, to 3.3 billion transactions, compared with 13.9% growth in 1999. Elliott McEntee, president and chief executive officer of Nacha, noted that direct deposit’s already high adoption rates are impeding volume growth.

A bright spot was an 18.4% increase in ACH bill payments, against 16.7% in 1999. “This growth rate indicates that this product is still being accepted by consumers in a very aggressive way, even though it is not being promoted by anyone very aggressively,” Mr. McEntee said.

Bank One Corp., which had ACH growth of 18.2%, was a beneficiary of increased acceptance of electronic bill payments. Leonard Heckwolf, a senior vice president, said Bank One’s large biller customers’ use of electronic bills rose 20%.

These clients “are getting more customers to sign up for electronic debit than in the past, which means fewer paper items were processed,” he said.

ACH transactions initiated over the Internet still make up only a sliver of total volume but are on the upswing, according to Nacha. It estimates that several thousand ACH transactions are initiated daily online (it only began tracking this volume in earnest last month).

Some traditional ACH payments showed surprising growth in 2000. Electronic data interchange, which transmits payments and related information in standard formats between business partners, increased 22.6%, to 129 million payments. No other category of transactions had better growth.

“A lot of people thought EDI would fade away very quickly” because of new Internet exchange formats including XML, Mr. McEntee said. One reason for its growth, he said, is that companies are adding more trading partners to their EDI networks.

ACH transactions’ dollar amount grew 6.5%, to $20.3 trillion. Especially heartening, Mr. McEntee said, was the 14.1% rise in commercial use of ACH payments, to 6.03 billion transactions. That trend has continued into this year; first-quarter levels rose more than 14% compared with the year-earlier period last year, Mr. McEntee said. Revenue growth has remained steady, increasing about 14% in 2000, in line with recent years, said Larry Forman, assistant director of Ernst & Young LLP’s cash management practice.

“It is a highly commoditized industry,” Mr. Forman said. “Virtually every bank offers ACH, with little differentiation between providers. Hence the decision about what provider to use revolves around price, with a minor influence of relationship and some minor feature functionality.”

While the lower bidder doesn’t always win business, he said, “all the finalists have low prices — pennies per transaction.”

Even if one bank develops a technology to help differentiate it or drive up its prices, the innovation is quickly copied, driving prices down again. The upside is that pricing has probably bottomed out, meaning revenue growth is almost matching volume growth, Mr. Forman said.

“Being the leader in technology for ACH is probably a fleeting experience for anyone,” he said.

As it happened, the top five ACH originators in 1999 were the top five in 2000. J.P. Morgan Chase & Co. topped the list with 552.1 million items, up 8.2%. Bank One had 484.6 million items, up 18.2%; Wells Fargo & Co. 461.4 million items, up 14.1%; Bank of America Corp. 351.2 million items, up 6.8%; and First Union Corp. 210.7 million items, up 11%.

The five leading banks processed a combined 47% of commercial ACH transactions; the leading 10, 62%; and the leading 15, 72%.

“Concentration at the top is still very evident, with a relatively small number of institutions generating a large volume of commercial transactions,” Mr. McEntee said. “The larger the volume a bank has, the less expensive it is for them to process the next transaction.”

J.P. Morgan Chase takes its No. 1 ranking “very seriously,” said Marcie Haitema, senior vice president of ACH business. “We work very hard to make sure we are as efficient as possible, as well as market-competitive in our offering so that we maintain our position.”

New types of payments, such as ACH initiated over the Internet and check truncation, are still in the experimentation phase, Ms. Haitema said. More immediate growth will come from demand for direct deposit by middle-market and smaller companies, and from large corporations that are taking to use of global ACH.

“We’ve seen an accelerated growth rate of international payments,” Ms. Haitema said. “Large corporations are truly dealing with global business.”

Leslie Graham, ACH product manager at First Union, said new Nacha initiatives helped the Charlotte, N.C., banking company achieve growth even though direct deposits and similarly obsolescent payments leveled out. She singled out ACH payments initiated over the Internet, telephone authorizations of nonrecurring debit payments, and check truncation at the point of purchase, as contributing to ACH volumes.

Volume at KeyCorp rose 39%, to nearly 161 million items. That nudged the Cleveland banking company up a notch to No. 6. David Rytel, assistant vice president and product manager of Key, credited the movement to established customers’ switch from paper to ACH payment.

Only four banks had lower ACH volume: FleetBoston fell 5.1%, Bank of Montreal’s Harris Bancorp, of Chicago, fell 4.6%, Michigan National Corp. 4.4%, and First Tennessee National Corp. 20.8%.

Dorothy Wright, vice president and manager of account processing services at First Tennessee, blamed its drop-off on the loss of a “single high-volume customer” that cut a deal to move ACH traffic directly through the Federal Reserve. Aside from that, she said, First Union’s ACH business was the same as usual, with an increasing number of small-business customers doing transactions through personal computer-based ACH origination software.

Citizens Financial Group of Providence, R.I., posted the biggest percentage increase: 448.3%, to 23 million items. It was helped by acquiring business from two banks that were among last year’s top 50 originators.

  • Table: Largest Originators of Automated Clearing House Payments

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