Federal Reserve Payments Study Summary of Findings

Transcription

1 Federal Reserve Payments Study Summary of Findings Matt Davies, AAP Federal Reserve Bank of Dallas TechMecca 2011

2 Headlines The number of noncash payments in the United States grew at approximately the same rate between and as it did between 2003 and, and the value of noncash payments declined: Noncash transactions grew 4.6% while dollar values fell over the same period Check volume continues to fall at increasing rates from past surveys Checks written from consumers to businesses fell precipitously Check clearing has become increasingly electronic Debit cards are now the most used non-cash payment instrument Credit card usage shows no growth Prepaid card usage, particularly open loop prepaid is growing rapidly 1

3 Number of noncash payments and rates of change Instrument ( ) ( ) Total % 4.5% 1 4.6% Checks paid % -6.5% -7.2% ACH % 18.7% 9.3% Credit card % 4.6% -0.2% Debit % 17.1% 14.8% Signature % 15.1% 14.3% PIN % 20.6% 15.6% Prepaid NA NA NA NA 21.5% EBT % 10.0% 21.4% Other prepaid NA NA NA NA 21.5% 1 The growth rate has been adjusted for comparability, because the 2004 study did not attempt to estimate all 2003 prepaid card transaction volume. 2

4 Value of noncash payments and rates of change trillions Instrument ( ) ( ) Total $60.0 $67.6 $75.8 $ % 3.9% -1.6% Checks paid $39.8 $41.1 $41.6 $ % 0.4% -8.8% ACH $18.6 $24.1 $31.0 $ % 8.8% 6.2% Credit card $1.3 $1.7 $2.1 $ % 7.8% -3.4% Debit $0.3 $0.6 $1.0 $ % 15.5% 14.4% Signature $0.2 $0.4 $0.6 $ % 13.5% 11.1% PIN $0.1 $0.2 $0.3 $ % 19.5% 17.3% Prepaid NA NA $0.1 $0.1 NA NA 22.4% EBT $0.0 $0.0 $0.0 $ % 11.1% 22.6% Other prepaid NA NA $0.0 $0.1 NA NA 22.3% 3

5 In, nearly 80% of noncash payments were electronic; the most used instrument was debit card, eclipsing check Distribution of noncash payments in and Checks paid 32% 26% Debit card Checks paid 22% 35% Debit card Prepaid 1 5% Prepaid 1 4% ACH 15% 23% Credit card ACH 18% 20% Credit card 1 Prepaid includes EBT. 4

6 Cards were used for 60% of noncash transactions but only 5% by value; ACH and check were the dominant instruments by dollar value Distribution of noncash payments in Number Value Checks paid 22% Prepaid 1 5% 35% Debit card Checks paid 44% Debit card 2% 3% Credit card ACH 18% 20% 0% 51% ACH Credit card Prepaid 1 1 Prepaid includes EBT. 5

7 Check writing continued to decline since the last study, but the growth of check conversion to ACH slowed dramatically Number of checks written, paid, or converted to ACH 0.3 (1%) (8%) (11%) Checks written Converted to ACH ( ) -4.1% -6.1% 98.7% 5.4% 37.3 (99%) 30.5 (92%) 24.4 (89%) Paid as checks -6.5% -7.2%

8 Seventy-four percent of paid checks require clearing between depository institutions, and over 90% of those involve electronic clearing On us vs. interbank checks paid On-us Interbank 8.2 (22%) 29.1 (78%) (20%) 24.5 (80%) (26%) 18.0 (74%) 2003 Interbank checks cleared via image exchange or substitute check NA 43% 96% 1 An on-us check is a check paid by the depository institution at which it was first deposited. An interbank check is paid at one depository institution but drawn on another. 7

9 Check 21 and the use of image exchange have created new opportunities and challenges at the front- and back-end of the check clearing process Checks deposited by format 1 100% = 24.4 billion Image exchange and Check 21 exceptions Checks deposited as image 13% Total image exchanged items Images with IQA / IUA or codeline data mismatch (0.04%) 87% Checks deposited as paper Duplicate images or checks in duplicate files (0.01%) 1 Format by which account holders deposit checks at the depository institution of first deposit. 8

10 Consumer-to-business checks are declining at a faster rate than business checks Number of checks written by counterparty 1 Remittance POS Remittance / POS Other (total = 33.1) C2B B2B (total = 27.5) % -2% B2C % C2C % 1 Estimates are based on a random sample of checks processed by the Viewpointe archive member banks. Data includes banks that participated in both the and Federal Reserve Check Sample Study. C refers to consumer. B refers to businesses, nonprofits, or government organizations. P2P refers to person-to-person. 9

11 A slowdown in check conversion growth slowed overall ACH growth; other forms of ACH grew more quickly than check conversion Number of ACH payments by type ( ) (18%) (16%) ACH Converted checks 18.7% 9.3% 98.7% 5.4% 0.3 (4%) (96%) 12.0 (82%) 16.0 (84%) Other ACH 12.6% 10.1%

12 On-us ACH volumes grew at nearly twice the network volume rate; direct exchange use increased most rapidly but grew to only 1% of total Number of ACH payments by clearing method 1 ( ) (17%) (20%) ACH Direct exchange On-us 18.7% 9.3% NA 78.4% 20.6% 14.7% NA (16%) 7.4 (84%) 12.1 (83%) 15.2 (80%) Network 18.2% 7.8% Direct exchange and On-us entries are ACH entries cleared without the use of an intermediary network operator. The former are cleared between depository institutions. The latter are cleared between accounts at the same institution. 11

13 Credit cards were the only electronic instrument to show usage decline and fell to 20% of total noncash payments Number of credit card payments vs. other noncash payments ( ) Noncash 5.4% 4.6% (23%) (23%) 21.6 (20%) Credit card 1 4.6% -0.2% 62.5 (77%) 73.5 (77%) 87.4 (80%) Other noncash payments 5.6% 5.9% Credit card includes general purpose and private label credit card transactions. 12

14 Debit card use continued to grow at double-digit annual rates; PIN debit increased to nearly 40% of total debit transactions Number of debit card payments by type ( ) 37.9 Debit card % 14.8% (38%) PIN 20.6% 15.6% (37%) (34%) Signature 15.7 (62%) 10.3 (63%) (66%) 15.1% 14.3% Debit card includes transactions funded from demand deposit accounts and does not include prepaid debit. 13

15 Use of prepaid debit cards, including EBT, grew faster than other noncash payments; open-loop card use grew most quickly Number of prepaid debit payments by type 6.0 Prepaid debit % 1.3 (22%) General purpose % 0.3 (9%) (45%) Private label % 1.9 (58%) 1.1 (33%) 2.0 (33%) EBT 21.4% 1 Prepaid debit includes payments made by prepaid instruments purchased by households and payments by cards funded by US firms or government agencies to disburse payments or benefits to households (e.g., payroll cards, EBT); includes single-use and reloadable cards, but excludes transit cards, toll way systems and phone cards. 2 General purpose prepaid instruments are network branded by either credit card or PIN networks (e.g.,payroll or prepaid banking cards). Private label transactions are prepaid cards which are limited in usage to one or several merchants (e.g., gift cards). 14