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Summer 2004

Electronic Payments Surge: How and Why
More consumers conclude that e-checking is cheaper, easier and faster than writing and mailing paper checks

Americans have relied on paper checks as a primary payment method for generations. Yet the latest research from the Federal Reserve System indicates that consumers increasingly are tapping their checking accounts electronically instead of through paper checks.
Merchants Now Process Checks Electronically


After rising for many years, the number of checks paid by financial institutions in the U.S. declined from 49.5 billion in 1995 to 42.5 billion in 2000, according to a 2002 study published by the Fed. In contrast, the number of electronic payments (such as automatic bill paying and Internet banking) and debit card payments combined surged from 18.9 billion to 42.8 billion during the same five years.

While fewer checks are being written in the U.S., the number is still very large. Among the reasons Americans still like paper checks: They're familiar and reliable.

"Consumers generally understand how cash, credit cards, and checks work because we can visually see the process and have control," says Robert Lee, a technology specialist in the FDIC's Division of Supervision and Consumer Protection.

Some people also want to have "something tangible to prove you paid for a purchase or to show the IRS agent," Lee adds.

But electronic payments are growing dramatically as more consumers conclude that transacting business electronically is cheaper, easier and faster than writing and mailing paper checks.

To Learn More About Your Checking Accounts or Making Payments
Example: "Once online bill payment is set up with your bank," Lee says, "you only need to go online, select the vendor to be paid, choose a due date, key in the amount, and click the pay button."

Other popular electronic alternatives include direct payment programs (in which you authorize your bank to automatically pay bills, such as your mortgage or health club dues) and telephone banking (which enables you to pay bills any time using a touch-tone phone).


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Last Updated 08/26/2004 communications@fdic.gov