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Posted: Jun 15, 2017
Categories: Emerging Payments
Comments: 0
Author: Lou Grilli

The Growth of ACH and the Decline of the Personal Check

[Editor's Note: This article was previously published in CU Management magazine on and has been modified]

Two sets of numbers were recently released by NACHA and the FED, respectively: ACH transactions are up over 5%, and checks are declining by 2%. Neither of which are eye-popping numbers, but when taken together, raises the question: what does this mean for credit unions?

First a deeper dive into the growth of ACH. NACHA is a not-for-profit responsible for managing, governing and administering the ACH network. The most recent numbers from NACHA’s president, Janet Estep, claimed that ACH transaction volume rose 5.3 percent to 25.5 billion, representing a transfer of $43.7 trillion. While 5.4% growth sounds slightly anemic, a denominator in the billions takes a big numerator just to move a few percentage points. And to complete the math, that’s an average transaction of $1,748. One of the growth factors cited by Jan was the introduction in September of same-day payments, which allowed ACH payments to be processed within one business day rather than the next day or the day after. Jan added some more insight into the growth factors: she provided that recently they have seen higher growth in internet-enabled ACH (such as paying with Venmo and paying your cell phone bill from your share draft account) than in pre-arranged payments (such as payroll direct deposit, and company expense reimbursements).

Around the same time, the FED’s annual report showed a decline in check usage of about 2% over last year, or about a 50% decline since 2000 when 42.5 billion checks were written. More interesting is that the 95% of the decline is in checks under $500. Many businesses still rely primarily on checks to pay vendors, but the under $500 decline implies that consumer check usage is migrating to other forms, including using a debit card at the supermarket, paying for utilities using bill pay, or, if you’re a millennial, settling up for a pizza party using the Venmo app. But something gets lost when moving from check to ACH. In the past, when a tenant paid the landlord by check, there was branding on the upper left of the check that was seen by both parties each month, almost like free advertising. That goes away with ACH.

So that leads to the question: is this migration good or bad for the credit union? On the surface this seems like a no-brainer – ACH is way cheaper to process than checks. Considering that many credit unions supply their members with free checks, including shipping from the printer, and it makes the business case even stronger to encourage members to move to ACH-forms of payment. But scratch a little deeper and there’s more to it.

It may not be in the credit union’s best interest for members to move from check to ACH-based payments, if, for example, those payments are moving to Venmo. Users of the popular P2P app typically store their money in their Venmo account (a digital wallet) and except when funding a transaction that’s not covered by stored funds, the credit union is no longer involved. Even if the Venmo payment is funded by a CU debit card, the brand or card art is not displayed. It should be noted that many banks and some credit unions are signing on to with Zelle, a competitor to Venmo in which funds are moved directly from and to the user's checking or savings account.

Getting the member to move from paying their bills by check to paying their bills by using the CU-branded online bill pay is a great thing. It saves the member money (no stamps or envelopes needed), and it keeps the member on the CU website, viewing offers, interacting, and seeing the brand. It does cost the credit union to offer online (and mobile) bill pay, but from a marketing point of view it’s a valuable and very sticky service. Even in the world of online bill pay there’s a wrinkle. Many consumers are paying bills directly with the biller, instead of through the CU’s billpay site. Responding to the reminder email from your cell phone service provider by clicking on the “Pay Now” button, or going to the cable company’s website to pay using a share draft account number and CU routing number results in a “pull” or debit ACH transaction, but no eyeballs on the CU website. So moving from check to online bill pay is good, so long as it’s the CU-branded bill pay and not the biller’s website.

Whether moving from check to ACH and other payment forms is a good thing or not is a moot point – it’s inevitable. Some safe assumptions are that check usage will continue to decline, P2P usage will continue to grow, and the ability to pay bills online in some form or another will continue to be expected by members. Credit unions need to continue to add value to their members through education, and even better, rewards programs that provide incentives for making CU-branded bill pay transactions, paying for groceries using debit or credit instead of writing a check or paying cash, and creating compelling digital offerings such as including P2P in the mobile banking app.


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Lou Grilli

Lou GrilliLou Grilli

Lou is the AVP of Product Development & Thought Leadership at Trellance and is responsible for providing leadership to the organization on emerging payments and industry trends, as well as managing the product portfolio.

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