New Options in Financial Payments Systems

When I started in banking nearly 45 years ago, the payment methods were limited, compared to today. There were no automated teller machines, no Internet, no cell phones and no personal computers. Instead there were lots of branch offices at which people could come in and transact business, a few drive-up facilities, some telephone access and credit cards. Since that time, there has been a virtual explosion of new financial payment system options.

Recently I came across some data resulting from The 2013 Federal Reserve Payments Study, updated as of July 24, 2014. The study indicates that plastic cards are being used prevalently in the payment system today, and that there are three categories of cards: credit, debit and prepaid. A total of 776 million of these cards are issued in the United States, which means there are two and a half cards for every person alive in this country! Of this card total, 334 million are credit cards, 283 million are debit cards, and 159 million are prepaid cards. Prepaid cards are store gift cards, federal or state government-issued cards for various assistance programs, a few payroll cards and some personal cards that the consumer preloads. Usage of these cards on a monthly average is 23 times for debit, 11 times for credit and 10 times for prepaid. So while consumers own more credit cards, they use debit cards at over twice the rate of credit cards.

When comparing ATM usage to going to a branch to conduct an over-the-counter transaction, consumers’ habits were predictable. They used ATMs for 5.8 billion withdrawal transactions, compared with 2.1 billion over-the-counter transactions. The interesting part is that the average size of an ATM withdrawal transaction was $118, compared to the over-the-counter withdrawal transaction of $715. This could be due to ATM amount caps and to more consumer trust in the security offered by being in the branch. However, the one billion ATM deposit transactions averaged $374, compared to in-branch 1.6 billion over-the-counter deposit transactions that averaged $1,000.

Of the 287.5 million wire transfers, 94 percent were from businesses. Those totaled a little over $1,116 trillion. There also were about 3 billion ACH transactions and 1.8 billion secure online transactions. In addition there were 250 mobile payments made using a mobile wallet application, and 205 million person-to-person or money transfer payments completed.

As might be expected, the number of paper check transactions continues to decline, with 45 percent of that decline represented by transactions of less than $50, obviously replaced by the debit card transactions.

While these numbers are large, the trends are not surprising. More and more people are comfortable in utilizing automated transactions in all forms. Perhaps that checkless society we heard so much about back in the 1980s is becoming reality after all.

– S. Joe DeHaven

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