Increasing e-payment share in the B2C and B2B markets will ensure future growth in the US corporate payables market, according to JP Morgan Chase, particularly in the recurring payments sector. By 2005, JP Morgan Chase expects to convert 3.1 billion paper checks into ACH payments, up from about 160 million in 2003, within the B2C sector, as corporate check conversion has been shelved for now. Banks using check-to-ACH check conversion achieve savings of USD 0.6 per item, which implies that the industry could save USD 176 million in processing costs, depending on a bank’s operational extent.

Although corporate check conversion has so far been sidelined by the Check 21 Act, the ‘positive pay’ controls of corporate-issued paper checks, where enterprises advise their bank of the amount and payee of a check before it is disbursed, may be extended to ACH payments, according to Bank Systems Online. In other words, recurring payments that were converted into an ACH transaction would resemble a direct deposit, but have additional fraud and risk controls built in. With the top 5 US banks accounting for over half of all ACH activity in 2003, including B2B payments, great scope exists for corporate e-check conversion.

Last month, NACHA reported that for the first time in 2003, ACH debits originated by commercial financial institutions exceeded the number of credits initiated. Over 1.3 billion e-check payments were made in 2003, a 154 per cent increase on 2002 totals, with 80 per cent of ACH payments being used to settle bills, 18 per cent to transfer funds and 1 per cent, to make purchases. Figuratively, 204 million consumer purchases were converted into ACH debits at the POS in 2003, at an average total of USD 70 per check, according to NACHA.

(Bank Systems Online)