Electronic payments gaining in popularity

Associated Press

WASHINGTON — Americans’ use of credit cards, debit cards and other electronic payments is gaining fast on traditional checks.

Consumers and businesses write 49.1 billion checks a year, an increase of 53 percent from 32 billion in 1979, the Federal Reserve said in studies released Wednesday.

Over the same period, the number of transactions involving electronic payments, including credit cards and debit cards, rose from 5 billion to 30 billion, an increase of 500 percent, Federal Reserve officials said. A very small portion of the transactions involved payments over the Internet.

"We believe the results clearly paint a picture of a payments system in migration," said Fed vice chairman Roger Ferguson. "The data show strong growth in electronic payments since the early 1980s and lower than expected check volumes."

The big jump in electronic payments reflects the ever-increasing role of technology in the retail, financial and banking businesses, economists said.

"Businesses have adopted technologies that have made it more convenient for consumers to purchase goods," said Richard Yamarone, economist at Argus Research Corp. "Rather than writing a check, which can require several forms of identification, a cumbersome five-minute process, consumers can swipe a card."

To some extent, Americans are feeling more comfortable about using certain electronic payment options such as debit cards, Yamarone said.

Checks now account for roughly 60 percent of all payments in the United States that do not involve cash, compared with 85 percent in 1979. Electronic payments account for 40 percent of total noncash payments, compared with roughly 15 percent in 1979, officials said.

Federal Reserve officials pointed out that in 1979 debit cards did not exist and a national network of electronic clearinghouses, called the Automated Clearing House, was in its infancy. That network is mostly used for moving income payments, such as pre-authorized payroll checks, but also for debit payments, including mortgage payments.

"We clearly see that electronic payments are taking a strong hold of the market and are poised for significant growth in the next few years," said Cathy Minehan, president of the Federal Reserve Bank of Boston.

Other findings from the studies:

Consumers write about 50 percent of all checks, and businesses receive about half of all checks. About one-quarter of the checks are written to pay bills. The second biggest use — 19 percent — is for a purchase.

The average check value is $965, compared with $757 in 1979.

The 49.1 billion checks currently written are worth nearly $48 trillion a year. That is up from 32 billion checks valued at $24 trillion in 1979.

The 30 billion electronic payment transactions in the United States have a value of more than $7 trillion. Credit card transactions represented about half of those electronic payments — 15 billion — worth $1.23 trillion. Debit cards came in second place, with 8.3 billion transactions valued at $348 billion.