The changing dynamics in the payments industry led PayStream Advisors to believe there were new product opportunities for banks and solution providers in the B2B market. Recently released research proves they were right.
While checks remained the preferred method of B2B payments (72 percent), our research indicates that ACH payments were the preferred method among electronic payments, constituting 75 percent of ePayments [1]. A large number of enterprises prefer ACH over other electronic payment methods for its low cost, ease of integration with accounts payable systems, supplier acceptance, security, and protection against fraud. Recent PayStream survey data reveals that as many as 68 percent of U.S. enterprises have integrated ACH with their accounts payable system.
PayStream has recently released a Technology Insights Series report titled “Electronic Payments: Streamline P2P, Reduce Costs,” which provides detailed insights into the various ePayment mechanisms, the availability of remittance information with each payment type and evaluates the pros and cons of each. Click here to download the complimentary report >>
Based on an explosion of new methods to transmit remittance data along with ACH payments, PayStream’s analysts believe that U.S. ACH volume will spike in 2014 with a compound annual growth rate (CAGR) of approximately 12 percent. PayStream’s research has uncovered a strong demand from suppliers who are seeking automation in response to the high growth of ACH. We believe this will be the tipping point for opportunities for new payment solutions that fill the remittance void.
PayStream also studied the effects of implementing ACH without remittance information (“naked ACH”). However, our research reveals that there is a surging demand for ACH payments that include remittance details, as opposed to simply naked ACH transactions. PayStream has coined the term ACH – R (ACH file with remittance details), which encompasses any type of ACH that includes enough detail to post a transaction to a biller’s AR file. ACH-R includes CTX, CCD+ and other payment types where the data is enhanced outside of the ACH system, such as email, XML file transfer, or via web interface as well as future potential formats, including XML and ISO 20022.
Led by the promotion of the STP 820 standard by the Electronic Payment Network (EPN), PayStream believes that we are about to see an increased demand for ACH-R. Of the total B2B ACH ePayments volume, PayStream estimates that only 312 million (18 percent) of all B2B ACH credit payments contain enough remittance information to be automatically posted to receiving companies’ billing or accounting systems.
Herein lies both the problem and the opportunity. Of the ACH-R ePayments, only 65 percent of the remittance data is transmitted via the ACH network. The rest of the remittance information (approximately 100 million transactions in 2009) was transmitted outside of the ACH network due to limitations in delivery integration points at the buyers’ or sellers’ financial accounting system.
PayStream believes the combination of increasing demand for remittance details for ACH payments and ACH payment transactions, along with challenges in fully leveraging the ACH network for remittance advice, offers a huge potential for accounting service providers and banking service providers to cater to the market’s changing needs.
[1] PayStream Advisors, Federal Reserve and NACHA 2009 annual volume statistics
Those interested in learning more about PayStream’s research should contact Mark Colwell, Solution Advisor at PayStream Advisors.
