With Same-Day Clearing in Prospect, ACH Activity Simmers

Traffic on the automated clearing house network continues to climb at a steady clip as financial institutions and other users of the system mull over a proposal to speed up payments from next-day to same-day settlement.

In the quarter ended Sept. 30, the latest period for which data are available, overall volume on the ACH grew 4.15% year over year to 4.56 billion transactions, according to statistics compiled by NACHA, the regulatory body for the network.

NACHA’s figures do not include so-called on-us transactions, or those in which both parties to a transaction hold accounts within the same institution.

The mainstay of the ACH, prearranged payment and deposit transactions, grew at a 6% rate for debits and at 4.4% for credits. The combined volume of 2.2 billion transactions represents nearly half the network’s interbank traffic.

Under this application, coded PPD, employers can use credits to for payroll direct deposit and billers can use debits to collect recurring payments automatically according to prearranged terms agreed to by consumers. Businesses using the application include health clubs, homeowners associations, and charities.

Among the ACH’s e-check codes, the popular WEB application has grown to just over 900 million quarterly transactions, an 8.8% increase over the same quarter in 2013. WEB includes online bill payments as well as mobile transactions.

Cross-border activity, too, continued to grow at a brisk pace. The ACH’s IAT application for international payments increased 19.3% to 14.7 million payments.

By contrast, e-check applications that convert paper checks into electronic formats continued a long-term swoon. ARC, or accounts-receivable conversion, shrank nearly 10% to 385.8 million payments, for example.

In this application, billers convert paper checks collected in lockboxes into ACH formats for electronic processing. But the success of online and mobile bill payment has reduced the volume of these checks.

Similarly, two e-check applications used for point-of-sale payments in stores also showed double-digit declines as consumers increasingly turn to debit cards and other alternatives to checks.

POP, which refers to point-of-purchase transactions, dropped 12.4% to 88 million transactions. With POP, cashiers convert checks to ACH format in the checkout lane and hand the paper item back to the consumer.

A newer application, BOC, converts the checks later on after they have been bundled up and sent to back offices for processing. But BOC, too, saw a big decline—down 10% to 40.1 million items.

The latest figures come as the 40-year-old electronic payments network considers a proposal to speed up payments. The proposal, involving multiple settlement windows, would allow payments to settle the same day they are made, compared to next day under current schedules. If adopted, the new rule could satisfy a growing consumer demand for faster payments and widen the ACH network’s reach in payments markets.

NACHA released the same-day proposal in December, calling for same-day capability to be phased in over an 18-month span between September 2016 and March 2018. NACHA also proposes an 8.2-cent “interbank fee” payable on each same-day transaction by originating banks to receiving banks.

—John Stewart