Drum roll please!
That’s right ladies and gentlemen. It’s the moment you’ve all been waiting for!
The Federal Reserve has released it’s 2010 non-cash payments study…(crickets)…
Okay – maybe you haven’t been waiting as anxiously as we have here at Check Advantage. But the study does show some very interesting information about the payment habits of Americans.
Everyone is talking about the decline of checks and the rise of the debit card. But things really aren’t any worse for checks than expected. In fact – the numbers for check payments are actually better than some experts predicted.
Here’s the bad news for business checks and personal checks…
The Federal Reserve study shows that the annual rate of decrease in check transactions from 2006 to 2009 was 7.2%. If you look at the past few Fed payment studies, the rate of decline for checks has been 5 to 7 percent anyway. So it’s nothing new.
There had been some doomsday predictions from some in the banking industry that the decrease would be much more dramatic. In May of this year, Bob Meara wrote on the Celent Banking Blog that he felt checks could decline at nearly three times the historic rate.
“I wouldn’t be surprised to learn of check volume declines of the order of 10% to 20% per year,” said Meara.
Obviously, the situation isn’t quite that gloomy for checks. But it was a big win for debit cards.
Debit card use grew at a rate of 14.8%, and the number of debit transactions was close to 38 billion.
That’s an increase of 12.8 billion from the 2007 study. Debit cards have now officially surpassed all other types of non-cash payments.
Overall, electronic payments increased in the U.S. by more than 9% from 2006 to 2009. The last Federal Reserve study revealed that about two-thirds of all payments were made electronically. In the new study, electronic payments now make up more 75% of non-cash payments.
Here’s one item that’s pretty interesting – the growth in electronic payments did not come from credit cards.
Credit card usage in the U.S. actually declined since 2006. It was a modest decline of .2%. But as we’ve told you in many of our posts – much of the rejection of credit cards came after the U.S. fell into a recession in 2008.
Most recently we told you how 8 million people stopped using credit cards completely in 2010 alone. Those people aren’t even included in the current study. So a decrease in credit card usage could very well be a trend that continues.
More in-depth details on checks
The biggest decline in check writing came from the number of checks individuals wrote to businesses (10.6%). This would include both checks you write to pay bills and checks you write at the point of purchase in a store.
No big surprise there either. More of us are using plastic to pay because of the efficiency, and many people are finding it easier to pay their bills online. It is worth noting that checks written by consumers to businesses still make up 44% off all checks written.
The study shows checks written between businesses only declined by 2%. That means businesses across the country are sticking with checks as a way to pay.
Plus, it wasn’t all downhill for check writing. The number of checks written between individuals – or from person to person – actually increased by 3%!
Checks are also finding opportunities to adapt to changes in technology and still have a way to fit in – even with smart phones. You’ve probably heard about the different iPhone applications and Paypal programs that let you deposit checks through mobile banking.
The way checks are processed and cleared in the banking industry is also becoming more electronic. In the 2007 study, 43% of checks paid were processed electronically. In the 2010 Federal Reserve study – it’s up all the way to 96%!
“Not only does this study show the continued move from checks to electronic means of making payments, but we also see the extraordinary progress the industry has made in electronifying the clearing process for the 27.5 billion checks still being written,” said Richard Oliver, vice president of the Federal Reserve Bank of Atlanta.
That’s right folks – America is still writing 27.5 billion checks every year!
It is realistic to expect check usage to keep declining. But don’t expect them to disappear any time soon.
We’ll look deeper into this study in upcoming posts. A more detailed report on the study will come from the Federal Reserve in early 2011.
For now, you can read an overview at the Federal Reserve website.
Image Credit: erestor04 LotusHead
+Kasey Steinbrinck writes regularly on personal finances and the U.S. economy for Check Advantage. Visit them today and view their products including a big collection of Classic Checks as well as other Basic Checks.