June 1, 2011

Finding come as U.S. Treasury targets end to paper checks

Small businesses that already use direct deposit to pay employees are prime candidates for direct payment, says NACHA—The Electronic Payments Association, in a new study.

This new data was released as part of Direct Deposit/Direct Payment Month in conjunction with a statement from the Treasurer of the United States on direct deposit, in which the agency announced it will discontinue paper checks for Social Security and other federal benefits on Mar. 1, 2013.

 “The U.S. Treasury calls direct deposit ‘the right thing to do for benefit recipients and American taxpayers alike,’ and clearly employers of all sizes can benefit as well,” says Janet Estep, NACHA president and CEO. “Our study was designed to capture quantifiable data from small businesses to get at the heart of misconceptions deterring the use of direct deposit, so we can help small businesses better recognize the time- and cost-savings afforded by electronic payments.”

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The NACHA study examined small business attitudes toward direct deposit and evaluated the connection between direct deposit implementation and use of other financial services products. Revealing strong preferences towards ACH payments and showing the potential for direct payment adoption, more than 44% of small business direct deposit users currently employ and plan to continue using other ACH services from their financial institution.

“Direct deposit, in many cases, is the entry point into the ACH network for organizations, and from there, they begin to explore the business case for making more of their payments electronically,” says Estep. “The core competencies of the ACH network—efficiency, ubiquity, security, and the ability to pass payments plus information—make it uniquely poised to offer strong solutions to businesses of all sizes.”

 

 

Direct deposit serves as ACH gateway
The study, which surveyed 2,249 small business employers, revealed the preferences of direct deposit users and tendencies toward electronic payment. Several criteria were used to examine predisposition to direct payment, including current online bill payment activity; the use of deposit and cash management services; the number of bills paid; use of online banking services; and online banking activity.

In all cases, direct deposit users came out ahead of nonusers in the propensity for use.

Specifically, the study concluded:

• 37% of direct deposit users already pay at least a quarter of their bills online.

• Direct deposit users made 48 online or preauthorized bill payments in 30 days, two-thirds more than nonusers.

• Direct deposit users access online banking more actively than nondirect deposit users, with more than half accessing online banking on a daily basis.

Despite the trends associated with direct deposit users, there is room for continued growth in the use of electronic payments. Respondents indicated they had written an average 145 checks to vendors/suppliers in 30 days.

“What this tells us is that there’s a lot of opportunity for expanding use of electronic payments and a service-rich small business market for financial institutions,” says Estep. “Through the forthcoming Business Payments Directory and other developing initiatives, NACHA is working to provide the small business community with the resources to enable fully electronic payments.”

To read more about the study, click here.