Fed study finds growth in noncash transactions

The 2016 Federal Reserve Payments Study, published Dec. 22, 2016, found continued growth in all types of noncash transactions, particularly in credit and debit card payments. The report, sponsored the Federal Reserve Bank of Atlanta, includes three separate studies: The 2016 Depository and Financial Institutions Payments Survey (DFIPS) and 2016 Check Sample Survey (CSS) conducted by McKinsey & Company, and the 2016 Networks, Processors and Issuers Payments Surveys (NPIPS) conducted by Blueflame Consulting.

The Federal Reserve thanked numerous industry stakeholders who responded to its request for public commentary. “Payment industry participation drives the quality of the study's results," said Mary Kepler, Senior Vice President of the Federal Reserve Bank of Atlanta. “The Federal Reserve appreciates the industry's response in 2016 and looks forward to working with selected participants for the annual data collection getting underway in the first quarter of 2017.”

Increasing fraud monitoring, detection

The dynamic nature of the evolving threat landscape prompted the Federal Reserve to increase both the frequency and thoroughness of its surveys. Previously collected every three years, survey data will be collected annually in 2017 and going forward, representatives stated. The Fed hopes these efforts will help payments industry stakeholders mitigate fraud.

“To help characterize fraud in the payments system with more specificity, the 2016 study collected information on payment fraud reported by fraud type by general-purpose card networks along with information about the rollout of embedded microchips in payment cards that is intended to help combat card fraud,” report authors wrote.

Kepler said the increased frequency and thoroughness of research “reflects an increased desire within the payments industry for additional fraud-related information.” She noted that a limited amount of fraud-related information was available when the report was published, adding, “further results will be released in 2017 as the complete data set is more fully reviewed and analyzed.”

The report cited six common forms of fraudulent payment card transactions, initiated in-person or remotely:

1. Counterfeit fraud: transactions involving altered or cloned cards

2. Lost or stolen fraud: transactions involving lost or stolen payment cards

3. Card issued but not received: newly issued cards are intercepted before they get to a cardholder and are then used in fraudulent transactions

4. Fraudulent application: fraudsters apply for a new credit card using a fake identity or someone else’s identity

5. Miscellaneous: “Other” forms of fraud include account takeover and other emerging schemes

6. Fraudulent use of account number: ecommerce fraud can be committed without using a physical payment card

Researchers expressed optimism that U.S. adoption of EMV (Europay, Mastercard and Visa) technologies will stem the tide of in-person fraud, as it has in other countries.

“While the balance of card fraud in the United States is weighted toward in-person fraud, fraud in other countries is highly skewed toward remote fraud,” the authors wrote. “Reports from leading [chip-adopting] countries have cited declining counterfeit fraud accompanying rising chip adoption, and a similar effect may be observed in the United States in coming years.”

Increasing noncash market share

The study found an estimated 144 billion in U.S. noncash payments, reflecting an annual increase of 5.3 percent since 2012. Noncash transactions increased 3.4 percent to nearly $178 trillion, largely due to increasing acceptance of credit and debit card payments and adoption of new mobile and virtual payment schemes, researchers noted.

“Taken together, debit cards (including prepaid and non-prepaid cards), credit cards, ACH credit transfers, ACH debit transfers, and checks compose a core set of noncash payment types commonly used today by consumers and businesses in the United States,” the authors wrote. “These core noncash payment types are used both in traditional ways, such as in-person purchases, payroll deposits, and bill payments, and in relatively new ways, such as mobile payments, e-commerce payments, and online bill payments.”

Following are some additional report highlights:

• Card payments, including debit and credit card payments, grew to 103.3 billion with a value of $5.72 trillion in 2015, up 19.9 billion or $1.07 trillion since 2012.

• Card payments grew at an annual rate of 7.4 percent by number or 7.1 percent by value from 2012 to 2015. Card payments comprised more than two-thirds of all noncash payments.

• Non-prepaid debit card transactions grew in number but decreased in value, accounting for almost 60 percent of card payments in 2015 and more than 40 percent of all noncash payments. However, the average value of non-prepaid debit card payments dropped slightly from $40 in 2012 to $38 in 2015.

• Prepaid debit card payments reached 9.9 billion with a value of $0.27 trillion in 2015, up 0.6 billion or $0.04 trillion since 2012. General-purpose prepaid cards had the most growth in the category, increasing to 3.7 billion transactions in 2015.
• ACH payment transactions reached an estimated 23.5 billion in 2015, with a value of $145.3 trillion. ACH payments grew an estimated 4.9 percent in transaction volume and 4 percent in monetary value between 2012 and 2015.

• Check payments fell at an annual rate of 4.4 percent by number and 0.5 percent by value between 2012 and 2015. This reflects a stabilization in check volumes and value, slowing the overall rate of decline that began in the mid-1990s.

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