A Closer Look at Fed Payments Study Unveils Some Surprises

A major Federal Reserve payments study released last week grabbed headlines for documenting a dramatic three-year increase in electronic transactions, but a closer examination this week by officials who worked on the report highlights a number of subsidiary trends in such key areas as remote deposit capture, person-to-person payments, and credit cards. Electronic imaging of checks for clearing between banks has become nearly universal, with 96% of some 18 billion interbank checks settled via image or substitute check (a printout of an image) in 2009, according to the report. That’s more than double the 43% image share in 2006. But most of this imaging is taking place at the bank, it turns out. Some 87% of checks still arrive at the bank of first deposit as paper items. That means remote deposit capture, often cited as perhaps the fastest-growing form of electronic payment ever launched, still accounts for only 13% of deposited checks. Remote capture allows businesses to create and deposit check images instead of the paper originals.  Another surprising result is that while the number of checks written declined overall, from 33.1 billion in 2006 to 27.5 billion last year, the volume of checks consumers write to each other actually grew, from 2.2 billion to 2.4 billion. All other categories of checks showed declines. Consumer to consumer is an area where little progress has been made toward electronic payment. Credit cards, meanwhile, are also running counter to the trend, according to the Fed report. While all other forms of electronic payment grew in the three-year period, credit plastic actually showed a slight decline in usage, from 21.7 billion transactions to 1.6 billion. “For the first time in these studies, we see a decline in an electronic payment instrument,” noted Richard R. Oliver, executive vice President at the Atlanta Fed. By contrast, debit card transactions soared to 37.9 billion from 25 billion, displacing checks as the most-used non-cash payment type

Published on December 15th, 2010 by Digital Transactions