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Study More than two-thirds noncash payments are electronic
MINNEAPOLIS (12/11/07)--Credit unions with credit and debit cards should take note: More than two-thirds of all U.S. noncash payments in 2006 were made electronically, according to the Federal Reserve’s 2007 study of noncash payments released Monday. For the period covered by the study--2003 to 2006--all types of electronic payments grew, while check payments decreased. The Federal Reserve’s 2004 Payments Study indicated that the number of electronic payments and check payments was roughly equal in 2002. About 19 billion more electronic payments were made in 2006 than in 2003. In contrast, the number of checks paid fell by about seven billion over the same period. Of the 93 billion noncash payments in 2006, about 63 billion were electronic and roughly 30 billion were checks. The annual use of debit cards increased by about 10 billion payments during the survey period to 25.3 billion payments in 2006. Debit cards now surpass credit cards as the most frequently used electronic payment type. Over the same period, automated clearinghouse (ACH) payments grew to 14.6 billion, an increase of almost six billion payments. Credit cards grew by almost three billion payments to 21.7 billion in 2006. The highest rate of growth from 2003 to 2006 was in ACH payments, which grew about 19% per year, followed by debit card payments at almost 18% in growth. Meanwhile, checks declined by an average of 6.4% per year since 2003, indicating that the pace at which check payments has decreased since the mid-1990s has picked up in recent years. “The results of our study underscore the ongoing importance of check electronification and other innovations that improve the efficiency of the U.S. payment system,” said Richard Oliver, executive vice president of the Federal Reserve Bank of Atlanta, and the Federal Reserves Banks’ product manager for retail payments. “With around 33 billion checks written in 2006, we expect checks to be around for some time.” The figures are consistent with credit unions’ experiences. “Nationwide, 61.7% of credit unions indicated on the June 2007 National Credit Union Administration 5300 Call Report that they offer an ‘ATM/debit card program’ and 50.5% reported that they had credit cards loans outstanding,” Marc Shafroth, director of data and statistics at the Credit Union National Association (CUNA), told News Now. CUNA’s 2007-2008 Credit Union Environmental Scan (E-Scan) for Strategic Planning had specific conclusions regarding credit unions and the use of debit cards. “Consumers’ rapid adoption of debit cards has been good news for credit unions,” the E-Scan said. “To remain competitive, especially with banks, credit unions need to consider debit-card rewards programs and bundling debit-card offerings with other credit union services to create ‘relationship packages’ that promote member loyalty and retention.” Regarding credit cards, the E-Scan concluded: “Credit unions should not overlook the importance of the credit card relationship to the overall member relationship. Credit cards are one of the most lucrative financial products in terms of return on assets. Credit unions thinking about selling off their card portfolios should investigate other options, including third-party agency card solutions.”
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