A recent study from the US Federal Reserve shows
that all forms of electronic payments are continuing on an upward
trajectory, with debit card payments outstripping credit card
payments and now being the most frequently used payment type.
Truong Mellor reports.

The number of non-cash payments in the US has
continued to rise steadily at an annual compound growth rate of 4.6
percent from 2003 to 2006, significantly faster than the previous
three years’ rate of 4 percent, according to a recent study
published by the Federal Reserve. The total number of non-cash
payments was 93.3 billion in 2006, with an overall value of $75.8
trillion. In comparison to these figures, the constant dollar GDP
and personal consumption expenditure increased by 3.2 and 3.3
percent during the 2003-2006 period respectively. The dollar value
of non-cash payments also rose by 3.9 percent annually during this

The study highlighted the continued growth of
electronic payments in the US. Electronic payments grew at a rate
of 12.4 percent each year, and now make up around 70 percent of all
non-cash payments by number, but less than half by value. The value
of electronic payments increased at an annual rate of 8.9 percent,
growing from 39.1 percent of non-cash payments in 2003 to 45
percent in 2006. Of the 93 billion non-cash payments in 2006, about
63 billion were electronic and around 30 billion were cheques.
About 19 billion more electronic payments were made in 2006 than in

Cheque payments decline

In contrast, the number of cheques paid dropped by approximately 7
billion over the same period. The annual number of cheques paid in
2006 is estimated to have been 30.6 billion, for a value of $41.7
trillion (see table, below).

Moreover, the study found that cheque clearing is
being done increasingly through electronic means. These changes
have improved the efficiency of the cheque clearing system for
interbank cheques that are drawn from a different institution than
the one at which they were deposited. According to the study,
around 40 percent of all interbank cheques paid were replaced with
electronic information at some point during the collection process.
In 2006, almost 3 billion consumer cheques were converted and
cleared as automated clearing house (ACH) payments rather than
cheque payments, an eight-fold increase since 2003. This number
includes cheques sent to billers or used as source documents to
initiate electronic payments at the point of sale. In the US, a
total of 33 billion cheques were written in 2006.

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Debit card payments also overtook credit cards
payments during this period. Among the three main types of
electronic payments, the annual use of debit cards increased by
about 10 billion payments over the survey period to 25.3 billion
payments in 2006. Debit cards now surpass credit cards as the most
frequently used electronic payment type. PIN debit payments
increased more rapidly over this period than signature debit
payments, with the total increase in the latter per year exceeding
the total increase in PIN debit payments. Over the same period, ACH
payments grew to 14.6 billion, an increase of almost 6 billion
payments. Credit cards grew by almost 3 billion payments to 21.7
billion in 2006. However, at an annual rate of 4.6 percent, credit
card payments increased at the slowest level of any electronic
payments instrument in the US

Overall, ACH payments saw the highest rate of
growth from 2003 to 2006 at around 19 percent per annum, followed
closely by debit card payments at almost 18 percent. Meanwhile,
cheque payments declined by an average of 6.4 percent per year
since 2003, an indication of the pace at which cheque payments,
which have been on the slide for over a decade, has picked up in
recent years.


ATM withdrawals value rises

The study also estimated the number and value of ATM withdrawals.
In 2006, there were around 5.8 billion ATM withdrawals, with a
total dollar value of $578 billion. Although ATM withdrawals have
actually decreased in number by 0.4 percent annually, their dollar
value has risen every year since 2003 by approximately 5.2 percent.
In constant dollars, the figure is closer to a 2.4 percent annual

The 2007 Federal Reserve Payments Study is
comprised of three separate research efforts commissioned to
calculate the annual number, dollar value, and composition of
non-cash retail payments in the United States. The Depository
Institutions Payments Study included responses from approximately
1,400 financial institutions including commercial banks, savings
institutions and credit unions. The Electronic Payments Study,
included responses from 65 of the largest card issuers and payment
networks. A third study devoted to the use of cheques by payer and
payee as well as their purpose, is expected to be published during
the first quarter of 2008.