E-Payments Pass Paper Payments For First Time

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The Federal Reserve reported last week that electronic payment transactions exceeded check payments in the U.S. last year for the first time ever.

The number of electronic payment transactions was 44.5 billion in 2003, compared to 36.7 billion for checks. Electronic payments include payments by credit and debit cards and automated clearinghouse transactions.

As recently as 2000, check transactions topped electronic transactions by 41.9 billion to 30.6 billion, but since then check usage has declined by an average of 4.3% a year, while electronic payments has increased an average of 13.2% a year, the Fed said. "The balance has shifted from check writing to electronic payments, and we expect the trend to continue," said Richard Oliver, vice president of the Federal Reserve Bank of Atlanta and product manager for the Fed's retail payments. At current growth rates, credit and debit card transactions will exceed paper checks in 2007, Oliver stated.

Still, the Fed found that the total value of check transactions continues to exceed the value of electronic transactions by a significant amount, $39.3 trillion to $27.4 trillion in 2003. Electronic payments consisted of ACH transactions, $25.1 trillion; credit card transactions, $1.7 trillion; and debit card transactions $0.6 trillion.

The Fed's calculations were derived from three different studies, the 2004 Federal Reserve Payments Study, the Depository Institutions Payment Study, and the Electronic Payment Instruments Study by Dove Consulting.

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