Consumer use of the Internet for financial activities is driving up automated clearing house volume.
Much of last year's ACH growth came from rising bill payment at biller and bank Web sites. And a significant part came from PayPal Inc. of San Jose, which runs the dominant person-to-person money-transfer site.
PayPal, owned by the online auctioneer eBay Inc. "is definitely a big user of the ACH network," said Elliot C. McEntee, the president and chief executive of Nacha, the electronic payments association.
Though volume was up for every type of ACH payment, the 38.9% jump in the Web category, to 1.34 billion transactions, was one of the biggest.
About 80% of the Web transactions were bill payments. Eighteen percent, or 241 million, were transfers of various kinds, including between existing bank or brokerage accounts, to fund new ones - and in and out of PayPal accounts.
Mr. McEntee could not put a number on ACH transactions involving PayPal, but a market researcher said the eBay subsidiary is probably the leading source of ACH transfer transactions.
"PayPal is huge," said Gwenn Bezard, a research director at Aite Group LLC of Boston. "It is driving tons of Web ACH activity."
Sara Bettencourt, a spokeswoman for PayPal, said its dollar volume totaled $8.8 billion in the first quarter, 41% more than a year earlier. Its full-year total last year was $27 billion.
There are three types of PayPal transactions: funding an account with a payment card, moving money from one PayPal account to another, and using an ACH transaction to fund a PayPal account or remit money to a customer's bank account.
The card transactions account for about half of PayPal's volume, Ms. Bettencourt said. She would not say how many ACH transactions make up the other half, but the ACH network is essential to the company's business, she said.
Steve Ellis, the chairman of Nacha and an executive vice president with Wells Fargo & Co.'s wholesale banking group, said the growth in Web transactions is not surprising. "Consumer behavior is changing," he said. "People are seeing more value" initiating payments online.
Mr. Ellis said this growth is a natural evolution of the ACH payment system, which was developed to help businesses make payments. "I think that what you're seeing here is the network growing up."
Wells Fargo originates PayPal's ACH transactions. It was the No. 3 ACH originating bank last year, with 848.8 million transactions, 21.6% than in 2004.
Over all, the number of ACH payments rose 16.2% last year, to 13.95 billion, more than double the 2000 total. The accounts receivable conversion format, for billers to turn paper checks into ACH payments, was again a standout, growing 60%, to 2.15 billion transactions. That is impressive, but nothing like the 479% growth reported last year.
Leonard J. Heckwolf, Nacha's immediate past chairman, said online bill payment is an important part of the transition and growing fast.
His employer, Bank of America Corp., has long been a leader in online bill pay. "We're just seeing incredible amount of consumer comfort in using the network to pay their bills," said Mr. Heckwolf, the Charlotte company's payment product executive.
Bank of America was the No. 2 ACH originator last year, with 879.1 million payments, up 19.8%.
Though bill-payment volume has been steadily increasing for several years, Mr. Heckwolf said the surge last year marks a turning point. "It takes forever, and then all of a sudden it's a flood - that's what we're seeing here," he said.
Business-to-business ACH also increased in 2005, but not as much as consumer transactions. The number of B-to-B payments - between trading partners, for example, or among units of the same company, or to pay taxes - increased 11.3%, to 2 billion.
"B-to-B has always been a harder sell," said Patrick J. Moore, the product executive for domestic ACH and deposit services at JPMorgan Chase & Co.
Many companies still use paper checks because they need the information on the accompanying invoices, said Mr. Moore, a senior vice president. But many others are doing so just "because that's the way it's been done for so many years."
JPMorgan Chase was the top ACH originator by far last year, with 2.7 billion transactions, up 17.7% from 2004.
Mr. Heckwolf, who left it in March for B of A, said B-to-B growth has been disappointing. "The industry has not provided the robust solutions that are needed" to convince businesses to shift to ACH payments, he said. "I think the industry needs to step up."
