The check payment system continues to function very well and there is no basis for anticipating a checkless society, as predicted by Dale Reistad and other bankers in the early 1970's, even by the year 2020.
For consumers, checks are a personally documented, convenient cash substitute with broad acceptance for bill payment from the home or office and for purchases at the point of sale. For merchants and financial institutions, checks are a low-risk, manageable-cost, easy-to-control, efficient to process method of payment and funds transfer.
Checks, which represented 57% of all consumer expenditures in 1994, are expected to represent only 31% of all consumer expenditures in the year 2005. This growth will be 67.4% greater than 1994 in absolute dollars, or an increase of $1.4 trillion in the next eleven years.
Personal checking accounts totaled 126 million in 1994. About 23 million adults (12%) of households were "unbanked" with no checking accounts, at the end of 1994. Nine out of ten consumers fail to keep their checkbooks balanced, and they account for almost 70% of all bounced checks, with 30% closed accounts or hard core fraud representing the balance.
The potential market for Check services can be defined in three parts. (Note Market segments and size below)
Segment A is the top of the check market. It is composed of merchants doing in excess of $1 Billion in retail sales per month. 1(Top 100 Retailers Chain Store Age Executive, August 1994)
Based on the 1994 Retail and Wholesale Product Gross Sales Volume, the Gross Sales Volume of Accounts with more than $1 Billion per month in sales represent 29% of the total volume. As an example ,the 100th merchant (on the top 100 retail sales list) reflected sales volume of $1.3 Billion per month.
In addition to the analysis of General Retail, the Home Improvement market is similarly constructed, with even fewer accounts that exceed the $1 Billion monthly level. Eight building supply chains exceed the $1 Billion level, and represent 28% of the market.
Segment B includes 30% of the retail market and includes car dealerships regional chains, and building materials. (This category represents the $5 million to $1 billion retail sales segment) The largest automotive dealer in the Top 500 merchants, reflected only a $197 Million size (Longo Toyota a CrossCheck Inc. customer), placing all automotive dealers within the B segment.
|
Segment C includes 41% of the retail market, and represents the under $5 million in monthly retail sales segment. This segment runs the gamut from attorneys to aluminum scavengers. Segment C is basically Mom & Pop organizations with less than $10,000 in checks. Although this market is enormous in terms of relative numbers, the comparative average dollar volume per account, is much smaller than the B segment.
Over 731,000 U.S. merchants' outlets use check authorization services available from 27 firms in the United States that Guarantee or Verify checks. In 1994 the industry Guaranteed 24.4% of the $636 billion face value of all check payments made at the point-of-sale, mostly at retail and food stores, 6.5% and Verified representing a 30.9% market share, collectively.
The check market potential over the next ten years (1995-2005) can be nearly $700 Billion in the value of checks Guaranteed or 17 times the current Guarantee market size. This potential, if realized, would result from the following:
$371 Billion in the Value of Check approved, which represents about 30% of the total Retail Sales in this segment. This represents the portion of the
Retail Sales segment (This segment has not been penetrated by ANY Check Guarantee company.)
$40 Billion in the value of check approved which competitive Guarantee companies have sold, and which may find a change in check service providers of interest.
A portion of the business that the Verification companies have penetrated, (5% or $5 Billion) which includes $224 Billion in Food, Dinning and Entertainment. This segment represents more than half of the Verification volume.
$224 Billion potential from the projected volume growth in checks (54.8%) through the year 2005.
A portion of the Bill Pay market segment, (1% or $16 Billion) currently at $1.6 Trillion, as Check companies move into this market, and venture into the Account Receivable and Bill Pay arena.
A 10% growth or $40 Billion from anticipated changes in banking law, required to support the 23 million consumers who do not currently have a checking account.
|
