Fed study confirms growth in electronic payments

The payment pie continues to grow, driven largely by credit and debit card payments. Meanwhile, although U.S. consumers are writing fewer checks, they're writing checks for larger amounts, and virtually all those checks are clearing electronically. In fact, one out of six checks written in 2012 was deposited by the payee as an electronic image using a mobile phone camera or other remote deposit capture option. These are just a few of the high-level findings from the Federal Reserve's recently released payments study.

The 2013 Federal Reserve Payments Study is the fifth in a triennial series the Fed undertook to get a better handle on payment trends. Excluding wire transfers, the study revealed that Americans made an estimated 122.8 billion noncash payments in 2012, totaling an estimated $79.0 trillion. This represents an annual growth rate of 4.4 percent between 2009 (the data collection period for the Fed's 2010 payment study) and 2012. The growth rate was short of the average annual rate of 4.7 percent charted for the 10-year period ending in 2012, the Fed said.

The use of general purpose and private-label credit cards by U.S. consumers, which had declined slightly between 2006 and 2009, returned to growth status, expanding at an annual rate of 7.6 percent and from 21.0 billion transactions in 2009 to 26.2 billion in 2012.

General purpose credit card use increased 6.8 percent a year between 2009 and 2012, when cardholders made 26.2 billion credit card payments. At an estimated 47.0 billion, debit cards were by far the most popular noncash payment option in 2012. Meanwhile, growth of prepaid debit cards (both the open- and closed-loop varieties) outpaced all other noncash payments, advancing 15.8 percent a year to total 9.2 billion in 2012.

New stats on fraud

The migration to card payments has not been without costs, most notably fraud. The Fed estimated 31.1 million fraudulent transactions valued at $6.1 billion occurred in 2012, and that fraud rates for credit and signature debit cards (both number and value of transactions) were "substantially higher" than for any other noncash payment instrument.

PIN debit had the lowest fraud rates. Not surprisingly, card-not-present fraud rates outstripped all other types of frauds perpetrated with credit and signature debit cards, estimated by the Fed at over three times the fraud rates on card-present transactions.

The new study marks the first time the Fed has published payment fraud data. But comparing the Fed's data to other past data collection efforts offers some insights. For example, the American Bankers Association publishes data every three years on demand deposit account (DDA) fraud, and in 2010, fraud against DDAs totaled $893 million, according to that data.

The 2013 Federal Reserve Payments Study includes data from three related collection efforts: a survey of banks and credit unions; surveys of card issuers, processors and networks; and a random sample of checks cleared through a group of large banks. The document presented preliminary findings. A detailed report is due out in 2014. Here are some additional data points from the preliminary report:

• Card payments, while just 6 percent of the value of all noncash payments, represented 67 percent of transactions by volume.
• The average credit/signature debit card payment in 2012 was $94.
• The average PIN debit payment was $39, up from $37 in 2010.
• The average prepaid card payment was $24.
• The average check paid by banks and credit unions was for $1,420, a 2.8 percent increase over 2010.
• The average automated clearing house transaction was $2,186, up from $1,946 in 2010, but down from a high of $2,754 in 2003.

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