Propelled by a proliferation of payment options, the use of the automated clearing house system continued to swell in 2006.
Nacha, the electronic payments association, said total ACH volume jumped 15.4% last year, to 14.98 billion transactions.
Accounts receivable conversion, or ARC, for checks converted to ACH at the retail lockbox, grew 32%, to 2.8 billion transactions, and Internet-initiated payments grew 35%, to 1.8 billion. The Herndon, Va., organization planned to formally announce its 2006 volume statistics today at the Nacha Payments 2007 conference in Chicago.
Bankers and observers expect that this will be another strong year because of a form of check conversion adopted in March back-office conversion for retail merchants. Several banks are to report their early experiences with this conversion method at the conference this week.
Even some of the biggest ACH players are showing outsized growth. Wachovia Corp., the No. 5 originator, increased its origination volume by 44.9%, to 696 million transactions.
Howard Forman, a senior vice president and electronic payments product consultant in Wachovia's treasury services division, said the Charlotte banking company had 180% growth in "e-check" applications last year including point of purchase and telephone initiation, in addition to ARC and the Web dwarfing the industry's 34% growth rate.
"Clients are looking for more than a transaction processor," he said. "They want a consultative financial partner who can help them navigate the regulatory environment, understand what operational challenges to expect, and provide best practices from our experiences with other originators."
"Unlike some of the other" originating banks, "our origination growth was not the result of recent acquisitions. It has all been new client acquisition and organic growth," Mr. Forman said. "We generate almost all our ACH volume from external client relationships. We don't have huge internal ACH-generating businesses."
Wachovia brought on some large originators in the fourth quarter whose volumes were not reflected in the 2006 results, he said. "I think we'll be having this conversation again next year."
Bank of America Corp., the No. 2 originator, had 32.6% volume growth, to 1.2 billion transactions, more than double the industry average.
Leonard J. Heckwolf, the innovation and development executive in Bank of America's global treasury services unit, said the biggest factor for the Charlotte banking company was growing adoption of ACH in the middle-market and small-business arenas, a shift "from the megaplayers down to the solid businesses where we have a strong focus."
B of A also picked up ARC volume from its January 2006 purchase of MBNA Corp., now Bank of America Card Services, and "we've been more aggressive at the high end of the market, too," he said.
Mr. Heckwolf said he expects continued strong ACH growth. "Consumers are more accepting of it than they were 10 years ago. Businesses are more familiar with it. And the products work better."
If there is any disappointment amid the generally strong growth, Elliott C. McEntee, Nacha's president and chief executive said, it would be in business-to-business volume, which grew 10.9% last year. "It lags behind a lot of the ACH products," he said.
Nacha plans to promote b-to-b ACH this year, including working with vendors of accounting software "to make it as easy as possible, to make business-to-business payments user-friendly," Mr. McEntee said.
Some business-oriented banks are finding ways to make b-to-b ACH work. Deutsche Bank, the No. 24 originator, had 110.2% growth, which it attributed to corporate cash management efforts. "Our growth has really been around corporate origination of payments," said Arthur Brieske, the head of global ACH at the Frankfurt bank.
He said Deutsche has developed technologies employing electronic data interchange and extensible markup language to integrate into corporate clients' financial systems through Deutsche's db-worldPAS Internet portal for corporate payments. "Clients can send us ACH and check and wire instructions in one file and in multiple currencies," he said.
