ACH Federal, which offers Web-based electronic-payment processing services to community banks and small businesses, recently reported record growth in customer acquisition and in transactions it processes over the automated clearinghouse network.

The Chattanooga, Tenn.-based company launched in 2007 and began processing transactions in 2009, but it took on the name ACH Federal in January, Craig Cotter, the company’s director of sales, tells PaymentsSource. The company previously operated under the name Terenine Inc., which is ACH Federal’s sister company.

Since the launch of the new name, ACH Federal has signed more than 20 financial institutions and more than 15 small-business customers. In April, the company recorded a 77% increase in ACH transaction volume since the beginning of this year, to 1.2 million transactions, Cotter says.

Overall, the company has processed more than 3.2 million transactions since March 2009 and currently averages more than 400,000 transactions per month.

ACH Federal calls its service a white-labeled electronic-payments platform because of its transparency to the bank’s customers, Cotter says. “We label the front-end tool for banks and give merchants the ability to upload files, set up direct debit and do telephone transactions without having to waste money with paper checks,” he adds.

ACH Federal provides the payments platform to customers as a software-as-a-service program and helps its customers avoid high fees associated with credit card transactions and check processing. For example, for every $100 check transaction, it costs merchants about $1.75 to process, Cotter says. Moreover, “it is probably going to take another dollar to write the check and take it to the bank, while the average ACH transaction is 25 cents for any transaction amount,” he notes.

ACH Federal prices the platform usually based on anticipated transaction volume, though banks and credit unions may obtain the full program for $7,500 with an unlimited number of customers, Cotter says. “A small business may contract with ACH Federal for as little as $500 for single use,” he says.

ACH Federal is smart to target small businesses, which represent a relatively untapped market for ACH payments, Nancy Atkinson, senior analyst with Boston-based Aite Group LLC, tells PaymentsSource.

Indeed, the future for ACH-based transactions appears good, Atkinson says. “ACH will continue to replace check payments and allow for the conversion of business-to-business checks, which are currently excluded from ACH-based transactions,” she notes.

ACH Federal is counting on that, says Cotter, noting the Federal Reserve is pushing businesses and banks “to get rid of paper checks because of the expense.” And in general,  “more consumers will make the switch over to ACH-based transactions because today’s consumers are comfortable paying for bills or goods and services online or through their mobile phones,” he says.

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