Fed Data Showed Electronic Payments Overtook Checks

Feb 03, 2020

According to the 2019 Federal Reserve Payments Study, payments using debit and credit cards and the automated clearing house system (ACH) saw considerable growth from 2015 to 2018, while checks are continuously seeing a decline in use.

In the study, the growth rate of noncash payments as defined by debit card, credit card, ACH, and check payments was at 6.7 percent every year between 2015 and 2018. The three years prior to that, these same noncash payments grew at a rate of 5.1 percent per year.

Payments made by checks fell by 7.2 percent every year from 2015 to 2018, this decline was faster than the three years prior, which was a 2.8 percent yearly rate of decline.

The total number of check payments dipped to 14.5 billion in 2018. This is the first time it has fallen below the total number of ACH debit transfers.

The trend continues to demonstrate check usage waning as the data shows that a total of 16 billion checks were written in 2018, for a grand total of $26.2 trillion. This was a significant drop from 20.2 billion check written and $29.68 trillion back in 2015.

All these results are not surprising, especially since the new technological developments made with debit and credit cards. However, the dramatic decline of check use was clearly seen since the turn of the century. In the year 2000, checks controlled 58.8% of all core non-cash payments. In 2018, it was down to only 8.3%. Overall, check usage declined from two-thirds to 26.6% in over 18 years.

The Fed designates core non-cash payments as total transactions from credit and debit card, automated clearing house, and check transactions.

The total number of credit and debit card payments increased at an average rate of 8.9%, every year from 2015 to 2018, faster than the three years prior that was 6.8%.

More evidence to suggest the rapid advancement of electronic payment methods is the amount of ATM cash withdrawals dropping. However, it is not declining as rapidly as the drop in checks.  In 2018, the withdrawals totaled 5.1 billion, which is down by 100 million from 2015.

Other payment methods that could be “eating away” at the check and ATM usage numbers include:

  • Electronic Bill Pay – According to PaymentInsights data, 60% of Americans are paying their bills using automatic bank withdrawal. Also, 60% are paying bills via online banking.
  • Digital Wallets – PaymentsInsights data shows that the use of digital wallets has increased by 13% since 2016, from 53% to 60%.
  • Shifting Merchant Repertoires – More than ever, consumers are shopping and using services such as subscription services, online retailers, Uber, which are all dedicated to electronic payments.

In Conclusion

There is no doubt, as evidenced in this Fed Payments Study, that checks are going to continue to experience a rapid decline as changes and innovations in technology paves the way for advancements in payments.

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