2003 Annual Report

Electronic Payment Volume Hits 'Tipping Point'

More and more, Americans are embracing electronic payments. While paper checks remain quite popular, their use is sliding as other payment methods take hold.

In 2000, checks comprised nearly 60 percent of retail non-cash payments. Check use peaked in the United States in the mid-1990s, jumping from 32.8 billion checks in 1979 to 49.5 billion checks paid in 1995, before falling to approximately 40 billion checks paid in 2002. (The chart at right illustrates this trend.)

Growth of Debit and Credit Cards
Technological competition to checks comes primarily from debit and credit cards. Volume for these transactions has accelerated dramatically since 1980, from roughly 5 billion to nearly 25 billion transactions in 2000. There is a consensus that the industry has reached a "tipping point," after which the volume of electronic payments will accelerate even faster. This appears to be true for debit cards in particular, where transactions increased from 9.6 billion in 2000 to 15.6 billion in 2002.

Many believe that these new technologies are cheaper than checks as payment technologies, and will therefore completely replace checks. Estimates vary as to when this will happen, and it is not clear which payment technologies will eventually "win" the battle.

It's possible debit or credit cards might eventually dominate payments markets as checks and cash once did. It's also possible that some as-yet-unknown-but-superior payment technology will sweep through the market and replace these technologies.