Electronic Check and ACH Processing Continues to Soar
By Tina B

The Federal Reserve recently released its tri-annual payments on the use of debit cards and electronic check processing. The study included input from 1,400 financial institutions about payments from deposit accounts along with information from 65 of the largest payment networks and card issuers.

Checks processed electronically are approaching half of all checks paid. Transactions cleared through Automated Clearing Houses are growing faster than any other form of payment.

Automated Clearing House transactions grew faster than all other payment forms, with compounded annual growth of 18.6% from 2003 to 2006. The total number of transactions hit 14.6 billion compared with 8.8 billion in 2003.

The use of paper checks for payments is declining at an accelerating rate. The number of checks paid in 2006 was 30.6 billion compared with 37.3 billion in 2003 for a compounded annual rate of decrease of 6.4 percent.

The Federal Reserve reports that 40% of checks paid in 2006 were converted to electronics at some point in the collection process. That reflects the impact of Check 21 also known as the Check Clearing Act for the 21st Century, which took effect in late 2004 and radically changed the creation of image-exchange networks for checks.

The number of paper checks converted to Automated Clearing House payments, or electronic checks, grew to the large number of 2.6 billion in 2006 from just 300 million in 2003 for an annualized growth rate of 105%.

The Federal Reserve estimated that the value of 2006 payments was $75.8 trillion.3 billion in up from 81.4 billion in 2003. This was a compound annual growth rate of 4.6%.

Tina B has been in the payment processing industry for over 12 years.
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