For the first time in US history, the number of checks and electronic transactions for debit cards, credit cards and automatic payments will exceed 100 billion by the end of 2009, according to Moebs Services, an economic research firm in Lake Bluff, Ill. This volume represents all transactions from consumers and businesses and is based on research and projections conducted by Moebs $ervices using information from the Federal Reserve for 1979 to 2006.
"Based on current transactions, our projections show that debit cards and automatic payments are taking over at an increasingly rapid rate from the traditional checking account for most Americans," says Mike Moebs, CEO. "Over the past 30 years, paper check usage has dropped from 85 percent of all transactions to less than 25 percent this year." Credit card usage while increasing in an absolute sense is falling as a percentage of total transactions after rising for 25 years, added Moebs.
According to Moebs Services, transactions in 2009 will break down as follows:
• Debit card transactions - 33 percent
• Paper checks - 24 percent
• Credit card transactions - 23 percent
• ACH (Automatic Payments) - 20 percent
"What is noteworthy about the projected 100 billion transactions is that they do not represent an increase in US consumer spending, which began declining in 2008 and is still not back on track as we approach year-end," said Moebs. "This research indicates that consumers are doing significantly more transactions for significantly fewer dollars than in the past. This may be due to easy electronic payment methods replacing cash."
Moebs believes there are four implications for financial institutions and consumers:
...Financial institutions will see reduced overdraft revenue as consumers use fewer paper checks and opt out of overdrafts for their debit card accounts.
...Consumers' reliance on electronic payments systems for goods and services will require improved online security to prevent fraud and financial institution losses.
...Consumers will require faster, more frequent, and more complete and transparent communications from financial institutions in order to manage the volume of their transactions and avoid frequent errors.
...Automated systems seamlessly process transactions in real time will benefit both the customer and financial institutions. Institutions which accelerate their use of such technologies will enjoy dramatically reduced transaction unit costs.
"Our research suggests banks, credit unions, brokerage and investment houses should accelerate their planning for electronic payment use because we believe there will be implications to the bottom line of financial institutions in pricing, fee structure and service delivery," concluded Moebs.
The Federal Reserve studies on the payment system have acted as the frame work for the analysis and projections by Moebs $ervices along with proprietary data of Moebs $ervices and other secondary sources.