Automated Clearing Houses (ACHs) process both private payments, such as automatic deposits to wage-earners bank accounts, and public payments, such as direct deposits of Social Security stipends. The 12 regional Federal Reserve Banks provide ACH services to banks around the United States. Since 2000, the annual volume of payments transmitted by the Federal Reserve’s ACH system has increased from 3.8 billion to more than 6 billion. At the same time, the average cost of transmitting a payment has declined from about 1.6 cents to about 1 cent.

Aside from the Federal Reserve, why are only a handful of large firms operating ACH systems in the United States instead of many smaller ACH companies?