More Than 75% of Non-cash Payments are Now Electronic, Finds the Fed

The Federal Reserve’s 2010 study of non-cash payments has revealed that in 2009 more than 75% of all US non-cash payments were made electronically, a 9.3% annual increase since the Fed’s previous study in 2007. This growth and other statistics in the study emphasise consumers’ increasing adoption of electronic alternatives for payments in the US. The 2007 study revealed that in 2006 roughly two-thirds of the payments were made electronically.

From 2006 to 2009, the period covered by the study, all types of electronic payments (e-payments) included in the study grew with the exception of credit cards. (Wire transfers were not included in the study.) The number of non-cash payments in the US grew more slowly between 2006 and 2009 than in prior periods and the total value of non-cash payments declined. As in previous years, cheque payments continued to decline and were eclipsed by debit cards as the most used non-cash instrument in the US.

“The results of the study clearly underscore this nation’s efforts to move toward a more efficient electronic clearing system for all types of retail payments,” said Richard Oliver, executive vice president (EVP) of the Federal Reserve Bank of Atlanta, which sponsored the study. “It is also likely that the results reflect changing consumer behaviour during difficult economic times.”

The number of non-cash payments in the US increased 4.6% per year since 2006, approximately the same pace as the previous three-year period, 4.5%. The value of non-cash payments experienced an annual rate of decline of 1.6% over the last three years compared to an annual growth rate of 3.9% from 2003 to 2006. About 20 billion more e-payments were made in 2009 than in 2006, which represented a 9.3% annual increase. In contrast, the number of cheques paid fell by about 6 billion or 7.2% over the same period, while the number of cheques written fell by about 5.7 billion, an average of 6.1% per year.

While cheques written by consumers to businesses for household bill payments and point-of-sale (POS) transactions represented 44% of all cheques written, both payments types declined by 4.9 billion or 10.6% annually, reflecting growing comfort of consumers with electronic options. The use of cheques between businesses and between businesses and individuals experienced more modest declines. Cheques written between individuals, which may include some very small businesses, actually increased slightly.

The annual use of debit cards increased by over 12.8 billion payments, the largest increase by any payment type during the survey period. It reached 37.9 billion payments in 2009, which represented a 14.8% annual growth rate. Debit card usage now exceeds all other forms of non-cash payments and, by number of payments, represents approximately 35% of total non-cash payments. Over the same period, automated clearinghouse (ACH) payments grew to 19.1 billion, an increase of 4.5 billion payments. Credit card payments declined by 0.1 billion to 21.6 billion in 2009.

Prepaid card transactions had the lowest transaction volume of all non-cash payments at 6 billion; however, these transactions represented the fastest growing payment type, increasing 21.5% annually from 2006 to 2009.

The cheque collection process continued to become increasingly electronic over the survey period. Approximately 96% of interbank checks – those drawn on a different depository institution than the one at which they were deposited – involved electronic clearing, compared to roughly 43% during the 2007 study. Approximately 13% of cheques were deposited as images at the bank of first deposit.

“Not only does this study show the continued move from cheques to electronic means of making payments, but we also see the extraordinary progress the industry has made in electronifying the clearing process for the 27.5 billion cheques still being written,” added Oliver.


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