This month, banks, credit unions, non-profit associations, businesses, and governments across the nation are asking consumers to increase their use of Direct Deposit and Direct payment in place of paper checks. An industry group led by NACHA – the Electronic Payments Association, Electronic Payments Network (EPN) and the Federal Reserve Banks, is sponsoring the month and encouraging financial institutions and businesses to actively promote these services to their customers and employees.
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“During May, we encourage businesses and financial institutions to educate their employees and customers about the convenience, security and financial benefits of Direct Deposit and Direct Payment,” Elliott C. McEntee, president and CEO of NACHA, said in a prepared statement. “These services are no longer the wave of the future. They are widely used by millions of Americans who understand that they can save valuable time and money by getting paid and paying bills electronically.”
A recent study sponsored by NACHA (The Response Center 2005) shows that large companies are much more likely to use Direct Deposit than small (2-49 employees) and medium (50-499) size businesses. Although 75 percent of small companies surveyed were aware of Direct Deposit, only 26 percent used the service to pay their employees.
Of small business owners, 42 percent that don’t use Direct Deposit said they thought the service was designated for larger companies. However, a 2003 survey by Tinucci showed that even small businesses can save more than $5,000 per year by switching employees to Direct Deposit for paychecks.
“This survey points to a real opportunity for us in the electronic payments business to reach out and engage small and medium sized businesses to increase their understanding and use of Automated Clearing House (ACH) payments,” Mark Tizzard, Vice President of Strategic Migration for Wachovia Bank and 2006 Chairman of NACHA’s Marketing Management Group, said in a prepared statement. “As we continue our consumer advertising campaign, we also need to strengthen our industry messages that the ACH network is for all businesses, not just large corporations. The cost and time savings of Direct Deposit and Direct Payment could prove especially helpful to organizations looking to trim budgets and when time is at a premium.”
Another recent survey, the BAI Small Business Payment Strategies study, conducted in collaboration with Oracle and Unisys, found that among businesses having between $5 and $10 million in revenues:
- 80 percent of business in this segment expressed a strong interest in a technology-based electronic platform
- 82 percent of respondents in this group said they use or plan to use ACH direct deposit
- 79 percent of those responding currently use or plan to use wire transfer.
The findings of this survey will be discussed at a BAI TransPay Conference & Expo on Wednesday, May 24th, 2006, in Las Vegas, Nevada.
At the same time Americans are pushing to increase use of electronic payment systems, a coalition of consumers’ groups in Canada is calling for legislation to protect consumers making or receiving electronic payments. The Globe and Mail reports that nearly 500 million preauthorized payments were processed in 2003, almost seven times as many payments as were made in 1990. The Canadian Payments Association says there are two million preauthorized transactions daily, according to the Globe and Mail.
In addition, the Globe and Mail cites an Environics survey from March which indicates that 12 percent of Canadian bank users have reported problems with preauthorized payments during the last two years, a rate of more than 1,000 debit problems a day or 900,000 in two years. The most common problems cited are:
- Debits in the wrong amount (23 percent)
- Debits on the wrong date (19 percent)
- Double debits (17 percent)