I don’t think that anyone would be surprised if I were to say that the way that consumers and businesses pay for things is changing. While old habits die hard, the shift away from many conventional payment methods, caused by many new ways to pay, is underway.
While many authors have pointed out this change, further proof was published recently in an article from Digital Transaction titled New Fed Data Underscores How Far Electronic Payments Have Eaten Into Checks.
This article shares Federal Reserve data that shows check issuance was down 20.7% from 2015 to 2018 (20.3 billion checks written in 2015 versus 16 billion in 2018). In this article, the author also mentions that ATM cash withdrawals are down by 100 million transactions over the same time frame.
People and businesses still need to pay for things. While credit card transactions are up, there are other payment methods that are in play that are eating into the check and ATM usage numbers. Here are just a few from the consumer side:
- Electronic Bill Pay – Mercator’s most recent PaymentsInsights data of 3,000 consumers reveals that 60% of American are paying at least some of their bills via automatic bank withdrawal and 60% are also paying bills digitally via online banking or paying the biller directly via the internet. By contrast only 27% of consumers pay by mail (a proxy for check)
- Digital Wallets – Although they may not have lived up to the hype, digital wallet use is still impacting the use of other payment types. PaymentsInsights data shows that the use of digital wallets has increased 13% since 2016 from 53% to 60%.
- Shifting Merchant Repertoires – Consumers are shopping at different types of merchants. Subscription services, online retailers, Uber, Postmates, etc. are all predominately dedicated to electronic payments.
- Peer to Peer (P2P) Services – The services such as PayPal, Venmo, Zelle and the like have taken situations where a consumer might write a check or use cash to pay another person, and shifted that to an electronic transaction. Our most recent PaymentsInsights data shows that in 2019 about two-thirds (67%) of consumers are using P2P services up from 60% in 2018.
With the changing payments landscapes checks are likely to continue to steadily decline and suffer the “death of a thousand knives”.
Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group