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Richard R. Oliver
Rich Oliver is an Executive Vice President with the Federal Reserve
Bank of Atlanta and has been with the Bank since 1973.
Since 1998, he has served as Retail Payments Product Manager for
the Federal Reserve System. In this capacity, he has responsibility
for managing the Fed’s check and ACH businesses nationwide.
Earlier in his career, Mr. Oliver served as planning analyst,
Administrator of the Automated Clearing House, Chairman of the
Federal Reserve's Electronic Payments Implementation Task Force,
Manager and Officer in Charge of Software Development, Vice
President in charge of Automation Services, the Federal Reserve
System’s Product Manager for Electronic Payments Services, officer in charge of business
development and check software, and Staff Director for the Federal Reserve System’s Policy
Committee for Financial Services, where he was responsible for coordinating integrated financial
management, project management, and strategic planning for all the Federal Reserve’s
payments services nationwide. He also serves on the Federal Reserve Bank of Atlanta's
Management Committee. Mr. Oliver holds a B.S. in Mathematics from the University of Nevada,
an M.S. in Information and Computer Science from Georgia Tech, and an M.B.A. in Management
from Georgia State University.
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the
Retail Payment System in the USA
-The 2007 Federal Reserve Payments Study-
Richard Oliver
Executive Vice President, Federal Reserve Bank of Atlanta
Federal Reserve Retail Payments Product Office
Décima Conferencia Internacional de Sistemas de Pagos
Ciudad de México, 12 y 13 de Mayo 2008
Current Situation of the Retail Payment
System in the USA
Payments in the United States
Historical Perspective
Checks and credit cards were the main types of
non-cash retail payments in the United States
until the 1970s when ATM and Automated
Clearing House (ACH) options evolved nationwide
Debit cards became popular in the late 1990s
All payments alternatives grew continuously until
the late 1990s
The pace of change has been slow
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Managing More Rapid Change
As the pace of change became faster, business
profitability became more challenging
No accurate studies of the payments system as a
whole, and the check system more specifically, had
been done since 1979
In 2000, the Federal Reserve, as the largest
processor of check and ACH payments, decided to
conduct a valid study and share the results with the
whole industry
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Purpose of Study
Define and understand recent trends in the use of
noncash retail payment instruments
Estimate the annual number and value of check
and electronic payments in the United States
Better understand the composition of the check
market (who writes checks to whom and why)
Measure the pace of migration from paper-based
to electronic payments
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Scope and Methodology
The 2007 Payments Study included three
research efforts:
A Depository Institutions (DI) Payments Study
An Electronic Payments (EP) Study
A Check Sample (CS) Study
•The study methodologies from the 2001 and 2004
studies were repeated in order to ensure
comparability with those studies.
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Number of Noncash Retail Payments
CAGR
2000 2003 2006 2000 - 2003 2003 - 2006
Total (billions) 72.5 81.4 93. 3.9% 4.6%
3
Checks (paid) 41.9 37.3 30.6 -3.8% -6.4%
Debit card 8.3 15.6 25.3 23.5% 17.5%
Signature 5.3 10.3 16.0 24.9% 15.8%
PIN 3.0 5.3 9.4 21.0% 20.6%
Credit card 15.6 19.0 21.7 6.7% 4.6%
ACH 6.2 8.8 14.6 12.1% 18.6%
EBT 0.5 0.8 1.1 15.4% 10.0%
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Distribution of Noncash Retail Payments
2003 Number 2006 Number
Debit card
Checks Debit card
Checks 19%
(paid) 27%
(paid) 33%
46%
46%
23%
Credit card 1%
1% EBT 23%
16%
11% Credit card
EBT ACH ACH
2003 Value 2006 Value
Checks
Debit card
Checks 1% (paid) 55%
(paid) 61% 3% Credit card 1% Debit card
3% Credit card
36% 0%
0%
1% ACH EBT
41%
EBT ACH
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
A Closer Look at Check Payments
CAGR
2000 2003 2006 2000 - 2003 2003 - 2006
Total (billions) 72.5 81.4 93.3 3.9% 4.6%
Checks (paid) 41.9 37.3 30.6 -3.8% -6.4%
Debit card 8.3 15.6 25.3 23.5% 17.5%
Signature 5.3 10.3 16.0 24.9% 15.8%
PIN 3.0 5.3 9.4 21.0% 20.6%
Credit card 15.6 19.0 21.7 6.7% 4.6%
ACH 6.2 8.8 14.6 12.1% 18.6%
EBT 0.5 0.8 1.1 15.4% 10.0%
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Check Usage
Survey results are based on the checks paid by the
customer’s bank (paying bank)
Estimates are based on a two month sample of over
1400 financial institutions
The number of checks paid is different than the
number of checks written because of the possibility
that some checks can be converted to ACH debits for
the purpose of collection
The Check Truncation Act (Check 21) was adopted in
2004 and allows collecting banks to truncate their
checks and exchange check images for collection
Most banks offer both Check 21 and ACH conversion
services
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
A Closer Look at Checks Written
Number of checks written, paid, and converted to ACH CAGR Total change
(billions) (2003-06) (billions)
37.6
0.3
33.1 Checks written -4.1% -4.5
2.6 Converted to ACH* 98.7% 2.2
37.3
30.6 Checks paid -6.4% -6.7
2003 2006
Figures may not add due to rounding.
* Other forms of check conversion exist, but their volumes are insignificant.
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Composition of the Check Market
2006 distribution of checks by counterparty and purpose
Percent of sampled population of checks*
51%
– Representative random
Remittance
sample of over 32,000
Remit/POS checks.
POS
32% – Sample population is about
Income 40% of “prime pass” checks.
25%
Casual
– Consumers write 58% of
17% checks paid.
6% 16%
7% – Businesses/government
13% 5% receive 76% of checks paid.
3%
C2B B2B B2C C2C
“B” refers to business or government.
Figures may not add due to rounding.
* Population is “prime pass” checks processed by nine large commercial banks. Estimates exclude 0.2% of checks that
could not be classified.
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
A Closer Look at Card Payments
CAGR
2000 2003 2006 2000 - 2003 2003 - 2006
Total (billions) 72.5 81.4 93.3 3.9% 4.6%
Checks (paid) 41.9 37.3 30.6 -3.8% -6.4%
Debit card 8.3 15.6 25.3 23.5% 17.5%
Signature 5.3 10.3 16.0 24.9% 15.8%
PIN 3.0 5.3 9.4 21.0% 20.6%
Credit card 15.6 19.0 21.7 6.7% 4.6%
ACH 6.2 8.8 14.6 12.1% 18.6%
EBT 0.5 0.8 1.1 15.4% 10.0%
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Debit Card Payments by Type
Number of debit card payments CAGR Total change
(billions) (2003-06) (billions)
25.3 Debit card 17.5% 9.7
9.4 PIN 20.6% 4.0
15.6
5.3
16.0 Signature 15.8% 5.7
10.3
2003 2006
Figures may not add due to rounding.
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Prepaid Cards
Payment Instrument Number Value
(millions) ($ billions)
Closed loop prepaid 3,077 36.3
Open loop prepaid 322 13.3
Government prepaid 88 3.2
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
A Closer Look at ACH Payments
CAGR
2000 2003 2006 2000 - 2003 2003 - 2006
Total (billions) 72.5 81.4 93.3 3.9% 4.6%
Checks (paid) 41.9 37.3 30.6 -3.8% -6.4%
Debit card 8.3 15.6 25.3 23.5% 17.5%
Signature 5.3 10.3 16.0 24.9% 15.8%
PIN 3.0 5.3 9.4 21.0% 20.6%
Credit card 15.6 19.0 21.7 6.7% 4.6%
ACH 6.2 8.8 14.6 12.1% 18.6%
EBT 0.5 0.8 1.1 15.4% 10.0%
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
A Closer Look at ACH Payments
Number of ACH payments
(billions) CAGR Total change
(2003-06) (billions)
14.6 ACH payments 18.6% 5.8
2.6 Converted checks 98.7% 2.2
8.8
0.3
12.0 Other ACH 12.6% 3.6
8.4
2003 2006
Figures may not add due to rounding.
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
2007 View
Electronic payments today comprise over two-
thirds of all noncash retail payments
Card payments are now over half of all noncash
retail payments
Debit cards are now used more frequently than
credit cards
The number of checks continues to decline, and at
a more rapid rate
Check clearing is increasingly electronic
Biggest share of checks remaining are consumer
to business
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Conclusions
Payments are being made electronically and more
paper payments are being processed electronically
Results underscore the importance of check
electronification and other innovations that improve
payments system efficiency
Payment instruments and the preferences of
consumers and businesses will continue to evolve
Market intelligence is increasingly important and
payments system participants must carefully manage
assets and resources
Décima Conferencia Internacional de Sistemas de Pagos
Current Situation of the Retail Payment
System in the USA
Gracias por su interés
Detailed reports on the three studies are
available at www.frbservices.org
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