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ARC: Competing in a Commoditized Market

ARC: Competing in a Commoditized Market

Aite Group predicts that Account Receivable Conversion (ARC) will plateau at 4.0 billion items by 2007-2008, up from 1.2 billion in 2004. In the meantime, there will be minimal competition between ARC and check image exchanges.

By Gwenn Bézard, Gwenn Bézard

Boston, MA, June 20, 2005 – In a new report, ARC: Competing in a Commoditized Market, Aite Group examines the prospects of ARC, and competitive trends in ARC processing.

The explosive growth in ARC volumes will run out of steam by 2008, largely because consumers will accelerate their shift away from checks and embrace electronic bill payment and credit/debit card-based bill payments; and also because it will be difficult for processors to offer ARC to billers with less than fifty to 100,000 items per month. In the meantime, Aite Group does not expect check image exchange to represent a serious competitive threat to ARC.

 As ARC matures over the next few years, competition among processors will focus on components of the value chains that are not yet fully commoditized. As shown by CheckFree's inroads in ARC processing, there is likely to be increased competition between market participants on clearing fees, as well as on the ability to process items faster by bypassing the ACH network. As ARC becomes fully commoditized, and as volumes start to plateau, a number of bank and non-bank processors will be tempted to consolidate volumes into the hands of specialist processors (e.g., CheckFree), or very large ACH originators (e.g., JPMorgan Chase, Wells Fargo, Mellon).

This is a 11-page Impact Note. Clients of Aite Group's Retail and Wholesale Banking services can download the report.