The ACH Continues to Sizzle, Racking up Nearly 6% Growth in the Third Quarter

By John Stewart

It operates so much in the background that many payments professionals may not have noticed, but the automated clearing house network is on a hot streak. The 41-year-old system notched a 5.9% year-over-year increase in transactions in the quarter ended Sept. 30, reaching a total of 4.83 billion, according to numbers released this week by NACHA, the governing body for the ACH.

That’s the fastest quarterly growth in two years and the third straight quarter of 5%-plus expansion. It comes as the network prepares to begin processing same-day settlements in the fall of 2016, speeding up clearing time from next-day processing. Under NACHA rules approved earlier this year, same-day settlement will start with ACH credits in September, with debits following later. Credits are used for hourly payroll, person-to-person, and bill-pay transactions. Debits are used for a wide range of consumer bill payments.

The ACH’s fastest-growing transaction category is IAT, which refers to cross-border payments. These increased 24.5% year-over-year, to 18.3 million transactions for the quarter.

Other so-called e-check transaction codes racked up mixed results. WEB, used for online and person-to-person payments, continued posting strong results. WEB credits, used specifically for P2P transactions, have soared 719% in a year, to 15.7 million transactions for the third quarter. P2P payments are attracting wider interest these days, with Apple Inc. reportedly interested in adding them next year. WEB debits grew 12.7% and blew past the 1-billion mark, finishing the quarter with 1.01 billion transactions.

Likewise, the TEL application, used for payments by voice over the phone, enjoyed robust growth, with a 14.2% increase to 117.5 million transactions.

But two e-check applications used for point-of-sale payments continued a trend of dwindling volume. BOC, used for back-office conversions of consumers’ checks, fell 10%, to 36.1 million items. Similarly, POP, which cashiers use to convert checks at the cash register, dropped 13.3% to 76.3 million transactions. Both applications are affected by the slow fadeout of paper checks.

Similarly affected are ARC payments, or conversions of paper checks sent to billers’ lockboxes. This category, which once rivaled WEB for volume, also continues to shrink, falling 6.8% to 359.5 million items.

But prearranged payment and deposit (PPD) transactions, which account for nearly half of the ACH’s volume, continue to grow. PPD debits, used for recurring payments to health clubs, homeowners’ associations, and charities, rose 3.3% to just shy of 890 million transactions. PPD credits, the original ACH application, are used for direct-deposit transactions. These grew 5.3%, to 1.45 billion items.

With WEB debits crossing the 1-billion mark for quarterly volume, the ACH can now claim two 1-billion-plus transaction codes. Taken together, all WEB and PPD transactions account for almost 70% of ACH traffic.

NACHA’s statistics do not include so-called on-us transactions, or cases in which an item is handled by a financial institution that houses both the payor and payee accounts.