It's always fun when contrarians question the conventional wisdom, even if their cause seems lost. Take checks. They're the dinosaurs of the payment industry, right? That's been the conventional wisdom since the 1970s.
Reinforcement of that view came in early December when the Federal Reserve released its "2004 Federal Reserve Payments Study," which estimates that in 2003, electronic payments of all types exceeded check payments for the first time: 36.7 billion check transactions vs. 44.5 billion electronic payments. The Fed's previous payment study, for the year 2000, estimated 41.9 billion check payments and 30.6 billion electronic payments. The Fed estimates check volume declined at a 4.3% annual rate from 2000 to 2003 while electronic payments grew 13.2% annually.
The business press trumpeted the triumph of electronics, and it indeed seemed like there wasn't much more to say about checks other than they're gradually going away. So I was surprised when a press release proclaiming the Fed's study reflected the "resilience and strength" of checks rolled into my e-mail box. The release was from the Check Payment Systems Association, the Washington, D.C.-based trade group of check manufacturers. It pointed out that checks accounted for $39.3 trillion in payments in 2003 compared with "only" $27.4 trillion for cards and the automated clearinghouse combined.
So I called CPSA Executive Director Wade Delk in an attempt to confirm my suspicion that the release was just spin by an industry trying to put its impending demise in the best possible light. He wouldn't bite.
"That has been the essence of the story for so long, and really, the data that is coming out does not show that, clearly does not show that," he says.
While not contesting the general accuracy of the Fed's estimates, he noted that adding up all the various forms of electronic payment overshadows the fact that no one form yet comes close to checks. Disaggregated, checks account for 45% of non-cash payments followed by credit cards at 23% and debit cards at 20%. Plus, the CPSA claims, the numbers don't include 9.1 billion ACH transactions that originated as written checks, and if they did, the check's rate of decline would have been only about 2%.
Check makers are coming out with new products and services to meet changing market conditions, Delk says. "Of all the different payment options out there, it (the check) is finding its place and still holding strong," he says.
OK. I'm still not sure I'm convinced, but I can't argue further if I want to squeeze in a comment about the Nov. 23 PBS Frontline program, "Secret History of the Credit Card."
Which is: I agreed with some of Frontline's points and disagreed with others, but most of all I wish a few executives with individual issuers would have had enough guts to go on camera and tell their side of the story. Punting to the American Bankers Association to do all the talking simply gave credence to the show's premise that credit cards gouge consumers with penalty pricing.
Authoritative analysis and perspective for every segment of the payments industry
Authoritative analysis and perspective for every segment of the industry
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