Checks and card transactions are giving way to electronic payments, made through an automated clearing house (ACH).

Jason Carone, senior vice president of ACH product management at The Clearing House (TCH), told Karen Webster of PYMNTS that ACH’s growth is transparently paving the way for faster payments.

“It’s a natural ramp for real time,” he said.

ACH volumes in the United States grew 8.7% in 2021, according to Nacha – formerly known as the National Automated Clearing House Association – and ACH transactions on TCH’s Electronic Payments Network (EPN) grew. increased by 9.6% over the same period, exceeding the overall industry volume. momentum. Fifty percent of ACH trade volume in the United States and 55% of the volume of the country’s 50 largest financial institutions (FIs) were reported on EPN, according to TCH.

As the stats show, 2021 has proven to be a banner year for TCH’s EPN, said Carone, who added that the transformation that had been anticipated for years — namely, moving away from paper checks — finally materialized.

“Controls may be easy,” he told Webster, “but they are ineffective.” No one – not businesses, not individuals – really likes sending or receiving them. The pandemic has forced significant changes, especially in B2B payments, he said, and we are unlikely to return to paper-based payments, even if more of us are returning to work in offices (at least a few days a week, anyway).

Read here: ACH volume on the clearinghouse’s EPN network topped the industry in 2021

Many companies have begun to review their cost structures and find that writing and mailing checks – especially on hundreds or even thousands of payments – was and remains a time-consuming and expensive proposition.

ACH payments are becoming truly ubiquitous. To get an idea of ​​just how ubiquitous electronic payments have become, he pointed to the fact that an overwhelming majority of recent child tax credit advance payments – over 90% – were made through ACH.

And while there might not be much more trail – at least in terms of percentage point gains – every additional 1% of ACH volume represents billions of dollars in payments making the jump to ACH.

B2B a natural candidate for ACH

With a willingness to leave checks in the rearview mirror, B2B seems an obvious candidate to make the (continuous) leap to ACH.

Nacha, which manages the development, administration and governance of the ACH network, said last month that 2021’s 5.3 billion B2B payments – valued at $50 trillion – reflected a 20.4% increase compared to 2020.

And a recent Nacha rule change that increases the value limit for same-day ACH transactions to $1 million – a tenfold increase – means that same-day ACH volumes on the US ACH networks will continue to rise in 2022, Carone said, noting that regular ACH limits are usually much higher.

While there may not yet be many transactions of this size on the network as same-day items, the increased limits can complement a number of use cases – allowing businesses to withdraw large sums from the banks, for example, or fund large payroll obligations on the same day.

In the healthcare industry, medical and dental practices and clinics are increasingly receiving claims payments electronically. Data from Nacha showed 426.3 million such payments made by ACH in 2021, up 17.9% from 2020.

Carone noted that this growth reflects the electronic funds transfer standard for healthcare, which is HIPAA (Health Insurance Portability and Accountability Act) compliant and has made it easier for healthcare providers to use the ACH network for disbursements.

P2P, too and transition to real time

Peer-to-peer (P2P) transactions, Nacha said, rose nearly 25% to 271.2 million. This statistic, Carone said, shows how comfortable people are growing with small P2P payments — your friends splitting the bill over lunch, for example, or paying your hairdresser or cobbler in cash only.

But more recently, we’re seeing a desire for speed with these smaller dollar payments – people want to see the money instantly.

“Payments, in general, are transitioning to real-time status,” he told Webster. There will always be room for same-day or next-day ACH, he said. It comes down to demand, he said — namely, how quickly does a sender want to pay?

“Traditional payrolls are pretty happy with the next day’s ACH,” Carone said, “but the gig economy needs to be faster,” where companies can pay contractors (delivery drivers, for example) several times a day – a competitive advantage for many companies.

As with any transition to electronic payments, fraud remains a priority. Carone noted that fraud rates on ACH remain low – the unauthorized debit return rate was just 4 basis points. Better information flows and transparency remain key lines of defense against malicious actors, he said, although companies are seeing attempts to compromise business emails are on the rise.

Social engineering fraud, he said, exists everywhere in the payment networks — in card transactions, checks and, of course, electronic payments.

“The hardest part, really, is educating the consumer about the risks of these payments,” he said. “I always say, if you get a letter or an email saying you have a new account number, you should pick up the phone and contact someone you already know.”

Looking ahead, he said we will see continued, organic growth in all sorts of sectors (although the war in Ukraine was a headwind) making the leap from checks and cards.

“I think this change will take some time to get to the big retailers because they’re so dependent on cards – but there’s going to be a wave of small customers, to start with, that gets bigger,” he said. declared.

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