payment trends 2008 study

What are recent trends for consumer payments? Checks, debit cards, credit cards, ACH included in this Federal Reserve 2008 research project. Following the 2007 study, it shows a continuation of significant changes in the way consumers and businesses make payments. Data previously published by the Federal Reserve show that in 2003 the number of electronic payments in the United States (made mostly through debit and credit card networks and the automated clearinghouse system) exceeded the number of check payments for the first time.

The recent data indicate that by 2006 the number of electronic payments was more than twice the number of check payments, or about two-thirds of all noncash payments (table 1, chart 1). The value of electronic payments has also grown substantially, but in 2006 they still accounted for less than half the value of noncash payments (45 percent).

This article examines findings from two surveys on the use of noncash payment instruments in the United
States conducted for the Federal Reserve—one of depository institutions (the 2007 depository institution
survey) and the other of electronic payment networks, processors, and credit card issuers (the 2007 electronic payment survey).

The number of payments made by debit, credit, or EBT card grew by 12.8 billion from 2003 to 2006,
reaching 48.1 billion and exceeding the number of checks paid by 17.6 billion (table 1, chart 3). Debit
card payments grew more than payments of other types, rising 9.7 billion over the period and contributing three times more to card growth than other types of cards combined. By 2006, the number of debit card payments (25.3 billion) exceeded the number of credit card payments (21.7 billion).
The value of debit card payments in 2006 ($1.0 trillion), however, was less than half the value of credit card payments ($2.1 trillion). The average value of debit card payments declined to $39 in 2006, a decrease of about $1 from 2003. The average value of credit card payments rose to $98, an increase of about $8 from 2003. In constant dollars, the average value of a debit card payment decreased about 4 percent a year, while the average value of a credit card payment decreased only slightly (0.01 percent a year).

Recent Payment Trends in the United States – 2008 (PDF download)

What are the implications for merchants? The increasing use of debit cards represents an opportunity to reduce the cost of accepting Visa and MasterCards. Why? By processing through the debit card network instead of the credit card network, the merchant can pay less than $1 per transaction regardless of dollar value instead of a percentage. In the past debit card usage was too low for some merchants to justify the cost of more complex systems, including PED’s (pin entry devices or pinpads), that would

CenPOS, a technology solution developed by First Payment Systems, dramatically improves the conversion of debit payments to the debit network.