The phenomenal growth in accounts receivable conversion of automated clearing house payments will eventually decline, because consumers are paying more monthly bills online or with credit cards.
In fact, according to a new report, growth will essentially top out in 2007.
Last year the ARC process converted 1.3 billion consumer checks into ACH payments at lockboxes. This year's total is likely to be 2.4 billion, the Boston research firm Aite Group LLC predicted last week.
By 2007 the figure will have climbed to about 4 billion, Aite said - but the next year it will scarcely rise.
The initial slowing, barely a tap on the brakes, was first reported in October. Statistics from Nacha, the electronic payments association, showed growth slipping from 791% in the second quarter of 2004 to 509% in the third.
Observers say ARC is a transitional technology that all-electronic payments will eventually replace.
"At some point, this product will go to zero, because there will be no more checks being written," said Leonard J. Heckwolf, a senior vice president and the global head of ACH and retail lockbox at JPMorgan Chase & Co. "I think it will live its life cycle and then taper off."
Mr. Heckwolf said ARC volume at JPMorgan Chase is still increasing as the company wins more large billers. "But two to three years from now, that growth may wane," he said.
ARC will decline, he said, because more consumers are permitting billers to automatically debit their accounts, many are paying with credit cards - and banks' online bill-payment sites are becoming more popular. "Certainly bill-pay is a component" in the expected decline of ARC, he said.
Mike Herd, a spokesman for Nacha, of Herndon, Va., said converting paper checks into electronic payments is just one step on the path to consumers' initiating payments electronically.
"The number of checks written to pay bills is significant but will eventually decline," he said. "We have realized for some time that check conversion products would be transitional."
Stuart Williams of CheckFree Corp., a provider of online bill-payment technology and services, said that some consumers are afraid to pay bills electronically - and that billers can use ARC to allay their fears.
One way, he said, would be for billers to start using ARC and then tell customers several months later, "Whether you realize it or not, you are already participating in electronic payments."
Billers should "give people time to see that using electronic payments is not the big, hairy monster in the closet that they might have thought it was," said Mr. Williams, the company's director of strategic planning.
Richard Leary, a senior vice president in Wachovia Corp.'s electronic services group, said that ARC has grown fast because the biggest billers - especially banks' in-house credit card units - started to use it. But with many of the biggest billers already on board, "a drop-off in growth is coming now," he said.
ARC alone "doesn't push people" to stop writing checks, Mr. Leary said. The conversion takes place at the lockbox, out of sight, and many consumers are not even aware of it.
But awareness can spur a switch to other payment methods, Mr. Leary said. For example, he said, merchants that convert checks into ACH payments at their registers have often reported that once people realize what is happening to their checks, they are likely to use debit cards during later visits.
Though much of the industry has been encouraging consumers to write fewer checks, Mr. Leary said "ARC has facilitated a way for them to continue writing checks and for us to see some savings and efficiencies in processing checks."
