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In recent news headlines, there have been debates as to whether an economic downturn or a “recession” has begun or could happen soon.

Recessions are often sparked by unique events that cool down production, resource acquisitions, consumer spending or cause job cutbacks.  Some historical examples include: 

• Early 1980s: Significant interest rate increases to slow down inflation growth.
• 1990-1991:  Savings & loan crisis, Persian Gulf war boosting oil prices.
• 2001:  Dot Com bust (online start-up retailers failing) and interest rates rising to cool inflation.
• 2007-2009:  Housing bubble bursting and causing large financial institutions and insurers to close or require significant help. 
• 2020: COVID-19 quarantines.

Most economic data is posted by government agencies within a few weeks following month-end or almost a full month after a quarter-end.  However, your organization is also collecting data via  the ACH transactions your institution sends and receives daily. And, thanks to SEC codes, your data is can be defined by who sent or received the payment and by what method. Also, thanks to Nacha’s 6-year retention requirement, this data should be on your system’s reports or within your databases to generate daily, monthly and quarterly reports.

Why is this interesting, you may ask? Well, there is so much you can learn from your readily available data!

If you are an ODFI, you can monitor payroll volumes submitted by your commercial account holders (PPD Credits typically with “Payroll”, “Salary”, “PR”, etc.) to observe any hiring or retention changes. Do you notice any cutbacks on utility payments by consumers to scale back energy, electricity, water, etc. (PPD Debits)?  With CCD/CTX payments, you can monitor volumes for vendor or other accounts payable payments.  Watch your Originators closely for their activity or possibly inactivity and utilize your review processes to inquire about volumes and limits needed.  On top of that, ACH debits will have Return Codes that may be monitored for economic circumstances such as R01 – Insufficient Funds, R08 – Stop Payment or if desperation sets in, higher “unauthorized” returned types (R05, R07, R10, R11, etc.) to buy consumers some time on paying bills.

As an RDFI, you’ll see a bigger picture, as most small to mid-sized financial institutions typically receive much more than they originate and also receive all the SEC codes. This becomes a good measure of consumer spending for a variety of payments.

• Consumer purchases can be observed whether they were purchased via the Internet (WEB) or via Phone Call (TEL).
• CIE payments can be monitored for increases or decreases of consumer bill payments and debt paybacks.
• POS transactions can be monitored to analyze account holder volumes of a specific retailer, such as Target.
• You can also review received CCD/CTX payments for B2B and PPD payments for B2C.

Anytime you attempt to analyze your financial institution’s data as a statistical sample, just be aware of any biases that could happen within your ACH data.   For example, mergers & acquisitions will boost your volumes versus prior months when completed. 

Access to ACH data is right at your fingertips and the convenience of SEC codes can help financial institutions group data by client types, how they spend money and on what type of good or service.  If your data appears to be a valid sample of the economy, you could build reports or even models based on that data. The best thing is that your data is available to you immediately, whereas government agency reports take weeks or even months to complete.

If you’re a fellow payments fanatic, I’d love to hear about any findings you’re able to share in the comments below. Happy calculating!