Electronic payments grew by 42% between 2003 and 2006;

Checks paid declined by 18%

Today (December 10), the Federal Reserve Bank of Atlanta released the summary results of the 2007 Federal Reserve Payments Study. According to the report, there were twice as many electronic payment transactions conducted as there were checks paid in the U.S. in 2006. The 62.7 billion electronic payments made in 2006 accounted for 67% of non-cash payments in 2006, up from a 54% share in 2003. During this same time period, the number of checks paid declined from 37.3 billion to 30.6 billion.

The 2007 Electronic Payments Study (EPS) was conducted by Dove Consulting for the Federal Reserve Bank of Atlanta to determine the volume and dollar value of electronic payments for the 2007 Payments Study. It documents the results of an industry-wide survey of EFT payment networks, organizations and processors.

Electronic payments continue to grow at a rapid, double-digit annual rate, increasing at a compound annual rate of 12.4% between 2003 and 2006.

The continuing decline in checks and their dramatic displacement by electronic payments—primarily debit and ACH—has rapidly transformed the payments landscape. On the debit front, increased merchant acceptance and customer adoption indicate that usage of cards is mainstream, with check usage at the point of sale becoming more of the exception than the norm. Although credit card growth has slowed in recent years, debit has maintained its momentum and become the leading electronic payment method. In addition, ACH payments have experienced strong growth as online bill pay and ACH eCheck conversion programs continue to expand.

The implications and opportunities of this continuing shift in the payments mix—not the least of which will be the ongoing increased unit cost of paper-based payments—will be significant for all parties: financial institutions, merchants, processors, networks, and consumers. A future edition of On Payments will provide a more detailed discussion on the Fed Study results and implications for industry participants.