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Friday, July 7, 2017

Fed details consumer, business noncash payments

Consumers relish electronic payments, and since the turn of the century, they have shifted a significant share of check writing to electronic alternatives such as credit, debit and prepaid cards and the automated clearing house (ACH). Businesses are weaning off of checks, too, but at a slower pace, and ramping up ACH payments. These are two high-level trends revealed in a new report analyzing the Federal Reserve Payments Study 2016.

The Fed takes a read on noncash payment usage every three years. A report released by the Fed on June 30, 2017, is the first in an expected series drawing on data collected last year from bank and nonbank payment services providers.

Since 2000, noncash payments have been growing rapidly, according to the Fed's analysis. By number, noncash payments nearly doubled, from 72.4 billion in 2000 to 144.1 billion in 2015. That works out to an annual growth rate of 4.7 percent. In that same 15-year span, the total value of noncash payments rose from $75.87 trillion to $177.85 trillion, for a real growth rate of 5.8 percent per year.

The Fed counts as noncash payments all check, ACH and card payments that clear through the banking system and card networks.

The newly released Federal Reserve Payments Study 2016: Recent Developments in Consumer and Business Choices details differences in household and business payment habits, as well as trends in the usage of alternative payment initiation methods such as mobile and online. Data collected for the study represent 2015 totals.

In 2015, checks accounted for 13.4 percent of all noncash payments and 15.4 percent of the total value of those payments, the Fed reported. This compares to 57.8 percent of all noncash payments and 66.7 percent of the total value of those payments in 2000. Households averaged just 7.1 checks per month in 2015, compared to 19.3 checks per month in 2000.

While business check writing also fell, businesses continue to be prolific check writers, averaging 24.1 checks per month in 2015, down from 66.0 checks per month in 2000. They also are big users of the ACH. But business use of card payments is modest, averaging just 19.7 transactions a month in 2015. The "combined value of business ACH transfers and business checks reached $148.54 trillion in 2015, which alone was more than double the real value of total ACH transfers and checks written in 2000 ($73.78 trillion)," the Fed wrote.

Consumer card payments growing strong

Growth in general-purpose credit and debit cards outstripped growth in all other noncash payment types, driven largely by consumer demand, according to the Fed's analysis. Debit cards are most popular with consumers, followed by credit cards, checks and ACH debits. Here's the breakdown for all consumer noncash payments in 2015 and increases since 2012:

  • 57.4 billion by debit card, an increase of 11.7 billion
  • 26.9 billion by credit card, an increase of 6.0 billion
  • 10.7 billion with checks, a decrease of 1.8 billion
  • 10.3 billion using ACH debit transfers, up 2.1 billion
  • 6.2 billion by private label prepaid debit card, an increase of 100 million
  • 3.6 billion using general purpose prepaid debit cards, an increase of 500 million
  • 2.0 billion with private label credit cards, up 400 million
  • 300 million using ACH credit transfers, up 100 million

Among all types of consumer payment cards, prepaid debit was the only category with a "significant drop in intensity of use" between 2012 and 2015, the Fed reported. While the number of active prepaid debit cards grew at 26.3 percent a year during that period, the number of payments made increased just 5.3 percent per year.

Meanwhile, alternative payment methods posted significant gains between Fed surveys, although the total number and value of these payments remain low. "When viewed in the context of the total number of noncash payments, these methods, while gaining traction, do not collectively constitute a significant number of payments at the current time," the Fed wrote.

Payments using mobile wallets, for example, grew 71.9 percent a year between 2012 and 2015, but at 1.3 billion, the 2015 total was small compared with other methods of noncash payments. Online payments grew from 1.8 billion in 2012 to 3.4 billion in 2015. Most online and mobile payments clear through the card and ACH networks. end of article

Editor's Note:

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