ACH Bill Payments Move into the Passing Lane

The financially struggling U.S. Postal Service is bemoaning the accelerating shift by consumers away from sending everything from Christmas cards to bill payments by physical mail. But, on the other side of the coin, new data confirm that the automated clearing house is where a lot of former paper-based payment traffic is going.

For example, ACH transactions under the so-called WEB standard entry class code for Internet bill-payment debits grew 8.6% in the third quarter to 672.2 million versus 618.8 million transactions a year earlier, according to a report from NACHA, the rules-setting body of the ACH. WEB transactions typically are consumer payments from biller-direct Web sites or third-party processors. NACHA statistics exclude on-us traffic.

Meanwhile, volume on the CIE (customer-initiated entry) code for consumer payments classified as ACH credits grew 13.9% to 39.5 million transactions from 34.7 million in 2010’s third quarter. CIE transactions are for bill payments initiated through online-banking sites. The code picks up two new ACH products, the Secure Vault Payments system for one-time retail payments and the EBIDS bill-payment service, which launched commercially last February. “A lot of the growth in CIE is EBIDS, which has moved to live production and has resulted in a pretty sizable increase” in online bill-payment traffic, says Mike Herd, managing director of ACH network rules at Herndon, Va.-based NACHA.

Together, recent CIE and WEB results indicate that annualized ACH bill-payment volume is approaching 3 billion transactions, according to Herd. “Those are categories that are growing robustly,” he says. “Online payments are secure and convenient; consumers seem to be adopting those.”

Conversely, the big ARC (accounts-receivable conversion) electronic-check code for bill-payment checks sent to lockboxes continued its decline in the third quarter. Volume fell 9.1% to 495.2 million transactions against 545 million a year earlier.

Other ACH e-check codes gave mixed signals about consumer check writing at the physical point of sale. The POP (point of purchase) code slipped 7.1% to 120.8 million transactions versus 130.1 million in 2010’s third quarter. But BOC, for back-office conversion, grew 15.5% to 51.1 million transactions from the year-earlier period’s 44.2 million. Given the overall decline in check writing, Herd surmises that BOC picked up some new merchant users.

TEL, the e-check code for telephone-based ACH payments, posted 91.7 million transactions in the third quarter, up 3.4% from 88.7 million. The new IAT code for international ACH transactions boomed 520% to 9.53 million from 1.54 million transactions in last year’s third quarter. IAT transactions can be either ACH credits or debits.

In related news, Herd says NACHA expects to issue a request for comment in 2012’s first quarter about a proposal to develop ACH business-to-business payments in the health-care sector.