Native Electronic Applications Shine on the ACH As Check-Based Codes Slide

By John Stewart

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Electronic processing of payments that originate as paper checks dropped dramatically in the second quarter on the automated clearing house network, while payments that start out as electronic items grew briskly, according to the latest report from NACHA, the ACH’s governing body.

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The decline in ACH applications that depend on checks mirrors the steady drop in paper-check volume in the U.S. Indeed, check volume is roughly half what it was at its peak in 1995, when it reached about 50 billion items.

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The sharpest drop among the ACH’s primary e-check applications occurred with POP, the code for point-of-purchase transactions. Here, item volume plunged a little more than 11% compared to the April-through-June period last year, with 104.3 million items compared to 117.3 million. POP volume did pick up almost 5% from the first quarter. With POP, store cashiers convert checks to an ACH format for electronic processing, then hand the check back to the customer.

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While POP transactions have been declining on a year-over-year basis every quarter since early 2011, the latest drop represents the format’s biggest such drop in percentage terms in that two-year span.

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Similarly, back-office conversions (BOCs) were off 8.33%, to 44.6 million transactions, though they were up 3.68% from the first quarter. BOC is similar to POP except that with BOC store personnel convert checks in bulk at the end of the day in central locations rather than on the spot in the checkout lane.

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By contrast, so-called native electronic payments grew at a rapid pace. These are transactions consumers initiate as electronic debits or credits from the beginning, with no paper items. The biggest of these formats is WEB, the application for bill payments on biller sites and for mobile payments. WEB volume shot up 12.22%, to 806.2 million transactions.

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At this volume, WEB is carrying nearly twice the volume of former e-check volume leader ARC, the code for accounts-receivable conversions. ARC, which refers to conversion of checks received in billers’ lockboxes, has dwindled to 430.5 million transactions, an 8% decline from the year-ago period.

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Meanwhile, other native-electronic applications grew briskly, as well. TEL, for entries initiated by phone, was up 8.4%, to 91 million transactions. And CIE, the code for transactions consumers make on online-banking sites, grew 6.38%, to just over 44 million transactions. CIE also includes volume on the EBIDs bill-presentment and –payment service and on the Secure Vault Payments online-payment system. Both EBIDs and SVP have been introduced by NACHA within the last few years.

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IAT, a code introduced four years ago for international transactions, generated 11.6 million transactions, flat with the first quarter but up 7% from the same quarter in 2012.

Overall, ACH network volume grew 4.7%, to approximately 4.35 billion transactions worth about $9.7 trillion, NACHA says.