Though transaction volume growth slowed on the automated clearing house system last year, several new payment formats that have been introduced recently or will be rolled out soon are likely to lead to new ways to use the network.
These topics, and some other major developments in the ACH market, are likely to generate significant buzz this week as bankers gather in Las Vegas for Nacha's Payments 2008 conference.
In the past month the electronic payments association has begun testing ways to use the ACH network to transmit bills electronically and to let consumers pay for online purchases. It also agreed to provide services to an international bank group developing a framework for large-scale ACH transfers between the United States and Europe.
Last week, two of the system's largest users, Wells Fargo & Co. and Bank of America Corp., said they plan to consolidate their ACH operations in a joint venture called Pariter Solutions LLC. Wells and B of A expect to be able to clear their shared transactions "on us," without using the operators' networks.
Elliott McEntee, Nacha's chief executive officer, said in an interview that one of its next big goals is to promote ACH transactions for business-to-business payments.
Last week the Herndon, Va., trade group announced it has hired Janet O. Estep, an executive vice president at U.S. Bancorp, to be its next president and chief executive.
Nacha is expected to report today that ACH volume climbed 12.6% last year, to over 18 billion transactions worth $36.6 trillion. The volume grew 15.4% in 2006 and 16.2% in 2005.
"We're pretty pleased" with the continued growth, Mr. McEntee said. "The economy started to slow up considerably toward the end of the year. We still continued to have a double-digit annual growth rate."
He noted that the commercial interbank ACH growth rate was 14.3%, and that the government sector's growth rate was only 3.6%.
Nacha is working on a way to position the ACH network more prominently in the business payment market, Mr. McEntee said. He would not discuss the plan in detail, except to say, "We're going to provide a set of tools so that a seller can request the ACH network be used."
Such a system could be advantageous for sellers when compared with other payment alternatives.
Procurement cards, which banks are promoting for corporate buyers to use for high-value transactions, put the seller in the position of paying interchange to receive the payment.
"The business-to-business space, unlike the consumer space, is very complicated, and needs vary so dramatically that you need to provide a lot of options to the corporate community," Mr. McEntee said.
A format that went into effect in March of last year for converting checks to ACH transactions, BOC (for "back-office conversion"), has gotten off to a slow start, with just 4.2 million transactions in 2007.
Mr. McEntee said acknowledged that it has had a slower uptake at this point in its life cycle than the lockbox conversion format ARC (for "accounts receivable conversion"), which went into effect March 2002.
ARC, the rock star of formats, grew 23.4% last year and drove strong ACH growth for some big banking companies. Wachovia Corp., the No. 4 originator, reported 58% growth in ACH volume, the strongest gain among the top banking companies. Executives said the increase came largely from ARC.
"We had several large ARC implementations in late 2006 and early 2007," said Howard Forman, the manager of payment consulting in Wachovia's treasury services unit. The company reported ACH growth of 44.9% in 2006.
James Hicks, the head of payables and receivables in the treasury services unit, said Wachovia does not anticipate matching its recent rates growth this year, because it does not have the same magnitude of projects in its development pipeline. "But we will be above the industry average."
JPMorgan Chase & Co. remained the leading originator last year, with 3.4 billion transactions, nearly matching the total for the next three originators. In terms of percentage, its 8.8% volume growth trailed the industry average, but the increase of 272 million transactions was more than the volumes of any originator outside the top 10.
Craig T. Vaream, a vice president at JPMorgan Chase and the ACH product executive in its treasury services group, said he sees "continued urgency by clients" to accelerate their receivables by converting checks to electronic formats.
He said the New York company is finding strong demand for its "image cash letter with ACH," which could be well suited for utility companies or insurers that run their own lockboxes and receive a mix of business and consumer checks; large-format business checks are not eligible for conversion, but six-inch consumer-size checks are, he said. "Clients want to send one file and let someone do the decisioning for them."
Mr. McEntee said a bright spot was the WEB format for Internet-originated transactions, which grew 26.1%. "We saw a lot more of the second-tier financial institutions having substantial volume increases," he said. Historically, origination volume has been concentrated at a small group of big banking companies.
