Academic journal article ABA Banking Journal

ARCs Are Hot

Academic journal article ABA Banking Journal

ARCs Are Hot

Article excerpt

With direct deposits and other categories of EFT transactions approaching saturation, e-checks are emerging as the fastest-growing replacements for paper checks. National Automated Clearinghouse Association, the electronic payments association, projects a billion or more e-check transactions in 2003, double last year's number. In Fed lingo, everything that's not a paper check or an electronic funds transfer (e.g., direct deposit, ATM or debit-card transaction) is an e-check. This category covers five Standard Entry Class Codes, within which NACHA reports these volumes for the first quarter of 2003:

WEB (initiated over the internet), 94 million transactions, more than three times 2002's first quarter.

POP (from point-of-purchase devices), almost 32 million.

TEL (telephone-initiated), almost 20 million, 2.6 times 2002.

ARC (accounts-receivable conversions of paper checks), almost 19 million, 37 times 2002.

RCK (returned checks), 5.5 million, i.26 times 2002.

All EFT and e-check payments are processed by ACH services run by either the Fed or Electronic Payments Network (EPN). In 2002, the Fed processed 5.0 billion ACH transactions worth $13.1 trillion; EPN, the only private ACH processor left standing, handled 1.9 billion transactions worth about $6.8 trillion. A 3,600% increase in ARC transactions! And TowerGroup projects that ARCS will hit 6 billion in 2007.

What's happening?

NACHA introduced the ARC code in March 2002 after a shakedown pilot effort. A minor insertion into receiving financial institutions' ACH software, ARC enables a biller to convert a paper-check payment into an electronic debit on the consumer's bank account--with her advance permission, of course. …

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