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A75

October 2008

Recent Payment Trends in the United States
Geoffrey R. Gerdes, of the Board’s Division of
Reserve Bank Operations and Payment Systems, prepared this article, with assistance from Kathy C.
Wang.
Survey data collected for the Federal Reserve in 2007
show a continuation of significant changes in the way
consumers and businesses make payments. Data previously published by the Federal Reserve show that in
2003 the number of electronic payments in the United
States (made mostly through debit and credit card
networks and the automated clearinghouse system)
exceeded the number of check payments for the first
time.1 The recent data indicate that by 2006 the
number of electronic payments was more than twice
the number of check payments, or about two-thirds of
all noncash payments (table 1, chart 1). The value of
electronic payments has also grown substantially, but
in 2006 they still accounted for less than half the
value of noncash payments (45 percent).2
The use of checks has been declining since the
mid-1990s, generally because check payments—and
most likely some cash payments—are being replaced
by payments made with electronic instruments. The
latest data show a continuation of this trend. Consumers in particular are paying electronically much more
often than in the past, with most of the increase
between 2003 and 2006 due to a rapid rise in the
NOTE: Darrel W. Parke and May X. Liu, of the Board’s Division of
Research and Statistics, provided valuable assistance with survey
design, sampling, and production of the statistical estimates.
1. Previous reports include Geoffrey R. Gerdes, Jack K. Walton II,
May X. Liu, and Darrel W. Parke (2005), ‘‘Trends in the Use of
Payment Instruments in the United States,’’ Federal Reserve Bulletin,
vol. 91 (Spring), pp. 180–201, www.federalreserve.gov/pubs/bulletin/
2005/spring05_payment.pdf; and Geoffrey R. Gerdes and Jack K.
Walton II (2002), ‘‘The Use of Checks and Other Noncash Payment
Instruments in the United States,’’ Federal Reserve Bulletin, vol. 88
(August), pp. 360–74, www.federalreserve.gov/pubs/bulletin/2002/
0802_2nd.pdf.
2. Payments transmitted over large-value funds transfer systems
(such as Fedwire, operated by the Federal Reserve, and the Clearing
House Interbank Payments System, or CHIPS, operated by the Clearing House Payments Company), sometimes called wholesale payments, are outside the scope of this article. These systems are used
primarily for large monetary and financial transactions, such as
overnight loans between depository institutions. Including such transactions in the calculations reported in this article would not meaningfully affect the total number of payments but would dramatically
increase the value. An unknown number of transactions of other types
are made over these systems by consumers and businesses.

number of debit card payments of relatively low
value (on average, $39). Consumers’ checks are also
increasingly being ‘‘converted’’ into electronic payments made via the automated clearinghouse (ACH)
system.3 In 2006, about 8 percent of all checks
written were converted to ACH payments, compared
with fewer than 1 percent in 2003.
The interbank check-clearing system itself is also
rapidly becoming more electronic, as original paper
checks are increasingly being ‘‘truncated’’ and replaced with electronic images during the checkclearing process.4 The apparent catalyst for the dramatic change in check clearing was passage of the
Check Clearing for the 21st Century Act (Check 21).
Signed into law in October 2003 and taking effect in
October 2004, Check 21 allows a collecting bank to
present a legally equivalent paper copy of an original
check—called a ‘‘substitute check’’—if the paying
bank requires a check to be presented for payment in
paper form.5 In early 2007, an estimated 57 percent of
all interbank checks in the United States were presented in original paper form and about 43 percent
were truncated and ultimately presented to the paying
bank either electronically or as a substitute check. Of
the portion that were truncated, 66 percent were
presented electronically. The number of checks presented electronically in 2007 was approximately three
times the number presented electronically just one
year earlier. More recent data on the portion of
interbank checks presented by the Federal Reserve
Banks indicate that dramatic changes have continued
since the 2007 surveys. Data for June 2008, for
example, indicate that about 53 percent of checks
3. Most check conversions take place at ‘‘lockboxes’’ to which bill
payments are mailed; a small proportion take place at retail establishments when checks are tendered at the point of sale. Consumers whose
checks are going to be converted are permitted to ‘‘opt out.’’ Under the
rules of the National Automated Clearinghouse Association (NACHA),
corporate and business-format checks are not eligible for conversion to
ACH payments.
4. Interbank checks are checks that pass between depository institutions.
5. Before Check 21, paying banks’ requirement that the original
check be presented was a major barrier to the widespread use of
electronic check-clearing technology. The option of providing a
substitute check gives depository institutions and their agents the
freedom to use electronic check-processing methods for most or all of
a check’s journey to the paying bank, as the substitute check is needed
only at the end of the process if the paying bank requires paper.

A76

Federal Reserve Bulletin h October 2008

1. Noncash payments in the United States, by type of payment, 2003 and 2006
Value
Number
Nominal

Type of payment

Constant 2006 dollars

Billions of
payments

Percent
of total

Trillions of
dollars

Percent
of total

Average, in
dollars

Trillions of
dollars

Percent
of total

Average,
in dollars

2003
Check1 . . . . . . . . . . . . . . . . . . . . . . . .
Electronic . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . .
Signature . . . . . . . . . . . . . . . . .
PIN . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . .
General-purpose2 . . . . . . . . .
Private-label3 . . . . . . . . . . . . .
ACH4 . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . .
CCD . . . . . . . . . . . . . . . . . . . . .
EBT 5 . . . . . . . . . . . . . . . . . . . . . .

37.3
44.1
15.6
10.3
5.3
19.0
15.2
3.8
8.8
7.3
1.4
.8

45.8
54.2
19.2
12.6
6.6
23.3
18.7
4.6
10.7
9.0
1.7
1.0

41.1
26.5
.6
.4
.2
1.7
1.4
.3
24.1
8.1
16.0
*

60.9
39.1
.9
.6
.3
2.5
2.1
.4
35.7
12.0
23.7
*

1,103
599
40
42
38
89
93
76
2,754
1,106
11,272
26

45.1
29.0
.7
.5
.2
1.9
1.5
.3
26.4
8.9
17.5
*

60.9
39.1
.9
.6
.3
2.5
2.1
.4
35.7
12.0
23.7
*

1,209
656
44
46
42
98
102
83
3,017
1,211
12,348
29

Total noncash payments . . . . . .

81.4

100.0

67.6

100.0

830

74.1

100.0

909

MEMO
Total checks written6 . . . . . . . . . .
Checks converted to ACH . . .

37.6
.3

46.2
.4

41.2
.1

61.0
.1

1,095
187

45.1
.1

61.0
.1

1,200
205

2006
Check1 . . . . . . . . . . . . . . . . . . . . . . . .
Electronic . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . .
Signature . . . . . . . . . . . . . . . . .
PIN . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . .
General-purpose2 . . . . . . . . .
Private-label3 . . . . . . . . . . . . .
ACH4 . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . .
CCD . . . . . . . . . . . . . . . . . . . . .
EBT 5 . . . . . . . . . . . . . . . . . . . . . .

30.5
62.8
25.3
16.0
9.4
21.7
19.0
2.8
14.6
12.6
2.0
1.1

32.7
67.3
27.1
17.1
10.0
23.3
20.3
3.0
15.7
13.5
2.2
1.2

41.6
34.2
1.0
.6
.3
2.1
1.9
.3
31.0
12.1
18.9
*

54.9
45.1
1.3
.8
.5
2.8
2.5
.3
40.9
16.0
25.0
*

1,363
544
39
40
37
98
99
92
2,121
959
9,384
27

41.6
34.2
1.0
.6
.3
2.1
1.9
.3
31.0
12.1
18.9
*

54.9
45.1
1.3
.8
.5
2.8
2.5
.3
40.9
16.0
25.0
*

1,363
544
39
40
37
98
99
92
2,121
959
9,384
27

Total noncash payments . . . . . .

93.3

100.0

75.8

100.0

812

75.8

100.0

812

MEMO
Total checks written6 . . . . . . . . . .
Checks converted to ACH . . .

33.1
2.6

35.5
2.8

42.3
.7

55.8
.9

1,277
267

42.3
.7

55.8
.9

1,277
267

Change
in average
over period
(dollars)

Value

Number
Change
over period
(billions of
payments)

Annual
rate of
change
(percent)7

Change
over period
(trillions of
dollars)

Nominal
Annual
rate of
change
(percent)7

Change, 2003 to 2006
Check . . . . . . . . . . . . . . . . . . . . . . . .
Electronic . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . .
Signature . . . . . . . . . . . . . . . . .
PIN . . . . . . . . . . . . . . . . . . . . . .
Credit card . . . . . . . . . . . . . . . . .
General-purpose . . . . . . . . . .
Private-label . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . .
Retail . . . . . . . . . . . . . . . . . . . .
CCD . . . . . . . . . . . . . . . . . . . . .
EBT . . . . . . . . . . . . . . . . . . . . . . . .

–6.8
18.6
9.7
5.7
4.0
2.8
3.7
–1.0
5.9
5.3
.6
.3

–6.5
12.5
17.5
15.8
20.6
4.6
7.6
–9.6
18.7
19.8
12.4
10.0

.5
7.7
.4
.2
.1
.4
.5
*
6.9
4.0
2.9
*

.4
8.9
16.0
14.3
19.5
7.8
9.9
–3.7
8.8
14.3
5.8
11.1

259
–55
–2
–2
–1
8
6
16
–633
–147
–1,888
1

–3.5
5.2
.3
.2
.1
.3
.3
–.1
4.6
3.2
1.4
*

–2.6
5.6
12.6
10.9
15.9
4.6
6.6
–6.6
5.5
10.8
2.6
7.8

154
–112
–5
–6
–5
*
–3
9
–896
–252
–2,964
–2

Total noncash payments . . . . . .

11.9

4.6

8.2

3.9

–18

1.7

.8

–97

MEMO
Total checks written . . . . . . . . . . .
Checks converted to ACH . . .

–4.5
2.3

–4.1
98.7

1.1
.6

.9
123.7

181
80

–2.8
.6

–2.1
117.0

77
62

NOTE: The number and value of checks and ACH payments for 2003 are revised from figures reported in Gerdes and Walton, “Trends in the Use of Payment Instruments in the United States,” because of revisions to some banks’
reported data and because an adjustment was made to account for rapidly
changing ACH check conversion rates. The number and value of checks and
ACH payments for 2006 are revised from figures reported in Federal Reserve
System, “The 2007 Federal Reserve Payments Study.” Components may not
sum to totals and may not yield percentages shown because of rounding.
1. Checks paid, that is, checks that were on-us (involving only one depository institution) and checks processed through the interbank check-clearing
system, including original paper checks and truncated checks presented either
electronically or as paper substitute checks. Includes checks paid by depository
institutions, U.S. Treasury checks, and U.S. Postal Service money orders.

Constant 2006 dollars
Change
Annual
Change
over period
rate of
in average
(trillions of
change
over period
dollars)
(percent)7
(dollars)

2. Includes four widely accepted credit and charge card networks.
3. Includes private-label credit cards issued by oil companies and many
large retailers.
4. Retail ACH payments include payroll, bill payments, and some payments
associated with the retail sector of the economy. CCDs are cash concentration
or disbursement transactions, about half of which are most likely internal corporate transfers. Retail includes all other ACH payments.
5. Electronic benefits transfer.
6. Total checks written includes checks paid through the check-clearing system and checks converted to ACH payments.
7. Compound annual growth rate.
* In absolute value, less than 0.05.

Recent Payment Trends in the United States

1. Noncash payments in the United States, selected years

NOTE: Check payments are checks paid, that is, checks that were on-us
(involving only one depository institution) and checks processed through the
interbank check-clearing system, including original paper checks and truncated
checks presented either electronically or as paper substitute checks. Includes
checks paid by depository institutions, U.S. Treasury checks, and U.S. Postal
Service money orders. Checks converted to ACH payments are included in
electronic payments.
SOURCES: The 1971 check figure is from a survey conducted for the Federal
Deposit Insurance Corporation and reported in William R. Powers (1976), “A
Survey of Bank Check Volumes,” Journal of Bank Research (Winter); for all
other years, Federal Reserve Board data.

presented to depository institutions through the Reserve Banks were presented electronically, compared
with about 30 percent in early 2007.6
This article examines findings from two surveys on
the use of noncash payment instruments in the United
States conducted for the Federal Reserve—one of
depository institutions (the 2007 depository institution survey) and the other of electronic payment
networks, processors, and credit card issuers (the
2007 electronic payment survey). Analyses of change
in recent years draw on similar surveys conducted in
2004 and 2001. The article also draws on a 2006
Board of Governors survey of checks paid by depository institutions. Information about the surveys is
given in the appendix.

TRENDS IN NONCASH PAYMENTS
The total number of noncash payments in the United
States (payments by check, ACH, debit and credit
card, and electronic benefits transfer, or EBT) increased from 81 billion to 93 billion between 2003
and 2006, or 4.6 percent a year. The nominal value of
noncash payments increased from $68 trillion to
$76 trillion, or 3.9 percent a year, over the same
period. Restating values in constant 2006 dollars,
thereby taking into account price inflation averaging
3.1 percent a year over the period, shows that the
constant-dollar, or ‘‘real,’’ value of noncash payments
increased only modestly between 2003 and 2006,
6. The Reserve Banks are estimated to have processed just over
40 percent of all interbank checks in early 2007.

A77

2. Noncash payments per capita in the United States,
selected years

NOTE: Check payments are checks paid, that is, checks that were on-us
(involving only one depository institution) and checks processed through the
interbank check-clearing system, including original paper checks and truncated
checks presented either electronically or as paper substitute checks. Includes
checks paid by depository institutions, U.S. Treasury checks, and U.S. Postal
Service money orders. Checks converted to ACH payments are included in
electronic payments.
SOURCES: The 1971 check figure is from a survey conducted for the Federal
Deposit Insurance Corporation and reported in William R. Powers (1976), “A
Survey of Bank Check Volumes,” Journal of Bank Research (Winter); for all
other years, Federal Reserve Board data.

about 0.8 percent a year.7 With the number of noncash
payments rising faster than the aggregate value, the
constant-dollar average value of a payment declined
$97 over the period (3.7 percent a year), compared
with a decline of $56 between 2000 and 2003. These
trends indicate that much of the growth in the number
of noncash payments was due to a large increase in
the number of smaller-value noncash payments.
Driven by various socioeconomic factors, the annual number of noncash payments per capita has
more than doubled since the 1970s, rising from fewer
than 150 in 1971 to more than 300 in 2006 (chart 2).
Rising average wealth and income has allowed more
consumption, which has evidently led to a rising
number of payments for products and services that in
the past households either provided for themselves or
did without. Some of the increase in the number of
noncash payments per capita most likely also came
from the replacement of cash with noncash instruments, as many small-value payments once made in
cash were increasingly being made via checks, or
debit or credit cards. (There is, however, no direct
evidence to show whether cash payments themselves
increased or decreased overall.)
Growth in noncash payments may also be partly
explained by changing payment processing methods
themselves. In some cases, replacing a check with an
electronic payment increases the number of transac7. Adjustments for inflation were made using the implicit price
deflator for U.S. gross domestic product. In this article, amounts not
identified as constant dollars are nominal amounts, meaning that they
are reported in actual dollars and have not been adjusted for inflation.

A78

Federal Reserve Bulletin h October 2008

tions needed to support a single payment. For example, paying a bill online through a bank sometimes
results in two ACH transactions (in contrast to only
one check payment in the past)—one to move the
funds from the payer’s bank account to a service
provider’s general payment account, and another to
move the funds from the general payment account to
the biller’s account. Likewise, processing practices
that in the past might have involved consolidation of
several payments into one check (a practice called
‘‘check and list’’) are in some cases being replaced by
practices that generate individual ACH payments.
While changes in processing methods undoubtedly
play a role in the growth of noncash payments, the
extent of such changes has not been measured.

Check Payments
The number of checks is declining both because
fewer are being written and because some are being
converted into electronic payments largely processed
through the ACH system.8 Because of a rise in check
conversions, the number of checks being paid is
falling faster than the number of checks being written.
Tracking only paid checks, therefore, does not provide a complete picture of how checks are being used.
Thus, this article reviews data on two types of checks:
• Checks paid—Checks that are ‘‘on us’’ (those
involving only one depository institution) and checks
processed through the interbank check-clearing system, including original paper checks and truncated
checks (those replaced with electronic images) presented either electronically or as paper substitute
checks.
• Checks converted to electronic payments—Checks
not processed through the check-clearing system
but converted to electronic payments made via the
ACH. These items are ACH payments and do not
have or retain any legal status as checks. Instead,
the original paper check that was converted is
considered a ‘‘source document’’ for the ACH
payment it generated.
For purposes of analysis, the aggregation of these
two types of checks—paid checks and converted
checks—is termed checks written.9

8. A small but unknown proportion of checks may also be being
converted into electronic payments processed over debit card networks.
9. Although counted as ‘‘checks written,’’ converted checks are not
necessarily written in a literal sense, but may merely be ‘‘tendered,’’ or
offered in payment at the point of sale. A customer may fill in the

Checks Paid
The total number of checks paid in the United
States declined from an estimated 37.3 billion in
2003 to 30.5 billion in 2006, a decline of 6.5 percent a year compared with an estimated decline of
3.8 percent a year from 2000 to 2003 (table 1).10
The increase in the rate of decline can be explained
by the rapid rise in the conversion of check payments into (electronic) ACH payments. After decades of being the dominant noncash payment type,
by 2006 checks paid amounted to only one-third of
all noncash payments (chart 1).
In 1971, approximately 112 consumer, business,
and government checks were paid per capita in the
United States (chart 2). At that time, cash was also
used extensively to pay bills and to make other
everyday payments, and the use of electronic payments was negligible by comparison. In subsequent
years, the number of checks paid per capita rose,
reaching 188 in 1995, with some checks replacing
cash as a means of payment. The number of electronic payments per capita also grew, but it was still
low relative to checks. After the mid-1990s, several
factors—the buildup of infrastructure for credit and
debit card payments, the expanding issuance of cards,
and the increasing use of the ACH to make payroll
and bill payments—combined to reduce the use of
checks, and by 2006 the annual number of checks
paid per capita had fallen to 102, which was 91 percent of the figure for 1971 and 54 percent of the figure
for 1995.11
Even as the number of checks paid was declining,
the nominal value of checks paid was increasing,
from $41.1 trillion in 2003 to $41.6 trillion in 2006.
In constant 2006 dollars, however, the value was
decreasing—by 2.6 percent a year from 2003 to 2006,
compared with a decrease of just 1.0 percent a year
from 2000 to 2003. Because the number of checks
paid was declining at a faster rate than the value, the
average constant-dollar value of a check increased
$154 over the latter period, reaching $1,363 in 2006.
As discussed below, the increase in average value
would not have been so great had the growth in

check or may simply hand a blank check to a cashier, who scans the
information imprinted on the check, voids the check, and returns it to
the customer.
10. The 2003 estimate (earlier reported as 36.6 billion) and the
2000 to 2003 rate of decline are restatements of figures reported in
Gerdes and others, ‘‘Trends in the Use of Payment Instruments.’’ The
restatements are discussed in the appendix.
11. The number of checks per capita has declined not only in the
United States, but also in other countries. See the box ‘‘Payments in
Other Countries.’’

Recent Payment Trends in the United States

A79

Payments in Other Countries
A comparison with selected industrialized economies—
Japan, the European Monetary Union (EMU), the United
Kingdom, and Canada—helps put the use of noncash
payments in the United States in perspective. The number
of checks per capita declined from 2000 to 2006 in all five
economies (chart).1
Only in the United States, however, was there an
accelerating decline in terms of both annual growth
rate—a decline of 7.4 percent a year from 2003 to 2006
compared with a decline of 4.7 percent a year from 2000
to 2003—and absolute number of checks per capita—a
decline of 26 checks per capita from 2003 to 2006
compared with a decline of 20 checks per capita from
2000 to 2003. Nevertheless, the United States continued
to have a significantly higher number of checks per
capita, albeit to a lesser extent than the years 2000 and
2003.
Among the economies considered, the number of electronic payments per capita rose fastest in the United
States, at 11.4 percent a year from 2003 to 2006. By 2006,
the number of electronic payments per capita surpassed
the number per capita in all economies except Canada’s.
The U.S. check-clearing system itself is becoming more
1. The payments reported were made by both businesses and consumers. To account for differences in size among the economies, each
economy’s payment figures were put on a per capita basis by dividing
them by the population of that economy.

conversion of checks of relatively small value not
been so substantial.

Checks Converted to Electronic Payments
The number of checks converted to electronic payments in 2006 was 2.6 billion, up from 0.3 billion in
2003 (table 1), almost doubling each year. As noted
earlier, about 8 percent of checks written in 2006
were converted to ACH payments, compared with
fewer than 1 percent in 2003. These were typically
checks converted by companies receiving them
through the mail in payment of a bill. Some checks
were tendered at the point of sale in retail establishments and were converted either at the cash register
and returned to the customer once the electronic
information was captured, or in the back office and
then archived or destroyed.
The average value of converted checks in 2006 was
$267, up from $187 in 2003, for a growth rate of
12.5 percent a year. In constant 2006 dollars, however, the average value increased only 9.2 percent a
year over the period. The average value of converted

electronic, as may also be the case in other countries.
Comparisons across economies of the number of checks
and electronic payments should therefore take into consideration the extent of electronification in the various checkclearing systems.

1. The European Monetary Union is made up of Austria, Belgium,
Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, The Netherlands, Portugal, and Spain. Cyprus, Malta, and Slovenia joined the EMU
after 2006 and were not included in calculations.
SOURCES: European Central Bank (2007), “Payment and Securities
Settlement Systems in the European Union,” August; Bank for International Settlements (2008), “Statistics on Payment Systems in the Group of
Ten Countries,” March; and Federal Reserve Board.

checks was substantially lower than the average value
of paid checks, in part because ACH rules prohibit
conversion of large-size business and other checks for
large amounts.12 In fact, in 2006 the average value of
converted checks, which tend to be written by consumers, was very close to the average value of checks
paid by credit unions (reported below), which generally serve consumer customers.

Total Checks Written
The total number of checks written (paid checks plus
converted checks) declined 4.5 billion, or 4.1 percent
a year, from 2003 to 2006, compared with 3.5 percent
a year from 2000 to 2003 (table 1). (Checks paid
declined even more—6.5 percent a year from 2003 to
2006 and 3.8 percent a year from 2000 to 2003.) The
average value of checks written in 2006 was $1,277.

12. Large-size business checks are typically 8 or 9 inches long and
have an ‘‘auxiliary on-us’’ field on the MICR line. Such checks, and
any check for more than $25,000, are ineligible for conversion.

A80

Federal Reserve Bulletin h October 2008

In constant 2006 dollars, the average value increased
$77 (or 2.1 percent a year) from 2003 to 2006,
compared with an increase of $92 (or 2.7 percent a
year) from 2000 to 2003.
The increase in the constant-dollar average value
of checks written combined with a substantial decline
in the number written suggests that most checks being
replaced with electronic payments were smaller-value
checks—typically, checks written by consumers and,
to some extent, by businesses to consumers. Businessto-business checks, on the other hand, were likely not
being replaced as rapidly. Evidence presented later
indicates that consumer-to-business debit card payments are probably responsible for most of the
replacement of checks written.

3. Electronic payments in the United States, selected years

Electronic Payments

Automated Clearinghouse Payments

The number of payments made over the major electronic payment systems in the United States—the
ACH system, debit and credit card systems, and the
EBT system—grew from 44.1 billion to 62.8 billion
between 2003 and 2006, for an annual rate of growth
of 12.5 percent (table 1, chart 3). More than half the
growth occurred in the debit card networks. However,
among the major payment systems, the highest annual
rate of growth (18.7 percent) was recorded by the
ACH system, which started the period with a much
smaller base than debit cards. Although the rate of
growth of electronic payments was somewhat slower
between 2003 and 2006 than between 2000 and 2003
(13.0 percent), the absolute increase in the number of
electronic payments was 5.1 billion greater over the
latter period.
The value of electronic payments increased more
slowly than the number (8.9 percent a year compared
with 12.5 percent a year), and the average value of
electronic payments declined from $599 to $544 over
the period. In constant 2006 dollars, the average value
declined 6.1 percent a year. Some of this decline was
due to the replacement of smaller-value checks by
ACH payments, and some was due to the large
increase in relatively small debit card payments.
Increases in the number of payments made over the
major electronic payment systems are due to increasing use of both traditional and innovative ways of
initiating payments. In addition, the use of privatelabel prepaid cards, an innovation not included in the
figures for the major electronic payment systems, has
become significant. (See the box ‘‘Innovations in
Electronic Payments’’ for a discussion of prepaid
cards and other new ways of initiating payments.)

An automated clearinghouse payment can be either a
credit transfer or a debit transfer. A credit transfer is a
transaction in which the payer’s bank originates the
payment, sending funds to (‘‘crediting’’) the payee’s
bank account. A typical use of an ACH credit transfer
is for payroll, with an employer initiating a ‘‘direct
deposit’’ from its bank account into that of an
employee. A debit transfer is a transaction originated
by the payee’s bank, which draws funds out of
(‘‘debits’’) the payer’s bank account. The processing
flow for a debit transfer is similar to the flow for a
check sent by the bank of first deposit to the payer’s
bank for collection. Converted checks are a relatively
new type of ACH debit transfer; another, more traditional type is an arrangement whereby a biller, such as
an insurance or mortgage company, by prior customer
authorization, periodically withdraws funds from a
customer’s transaction account at a depository institution.
Most of the growth in ACH payments between
2003 and 2006 (approximately three-fourths) came
from ACH debit transfers, which increased 27.7 percent a year and by 2006 had surpassed credit transfers
for the first time. Just over half the growth in debit
transfers came from an increase in check conversion.
The large majority of converted checks were checks
mailed to billers and converted at so-called lockboxes, identified within the ACH system as accounts
receivable check conversion (ARC) transactions
(table 2).13 Growth in the conversion of checks at the

SOURCE: Federal Reserve Board.

13. Rules for using the ACH system, promulgated by NACHA,
require banks to identify each payment according to a set of standard
entry classification (SEC) codes. References to ‘‘ARC’’ and similar
abbreviations in this section are SEC codes.

Recent Payment Trends in the United States

point of purchase (POP transactions) lagged by comparison, and back-office conversion (BOC) was new
and relatively small in 2007.
An additional 1.4 billion of combined credit and
debit transfer growth came from traditional prearranged payment and deposit (PPD) transactions, most
likely many of which also replaced checks. Almost
1.0 billion of growth came from payments initiated
over the Internet (WEB transactions). WEB transactions made at retail websites may have replaced or
augmented payments made by credit or debit card,
while WEB transactions made at billers’ websites
may have replaced checks sent through the mail.
Almost all the increase in the volume of transactions over the ACH system came from payments that
were smaller in value than typical ACH payments in
the past. In constant dollars, the average value of an
ACH payment dropped 11 percent a year from 2003,
falling to $2,121 in 2006. The constant-dollar average
value of the debit transfer portion of ACH fell more
than half, dropping 21.1 percent a year to reach
$1,535 in 2006. This huge drop in constant-dollar
average value is reflected in the growth rates for debit
payments, which grew less than 1 percent a year in
constant-dollar value—considerably less than the
27.7 percent annual growth in number of debit payments.
Distinguishing between large-value CCD (cash
concentration or disbursement) transactions (traditionally used for internal movement of corporate
account balances) and the more typical business and
consumer payments called ‘‘retail’’ (a category that
includes payroll, bill payments, and some payments
associated with the retail sector of the economy)
gives a different picture of change (tables 1 and 2).14
As a proportion of retail ACH payments, checks
converted to ACH payments (ARC and POP transactions) rose from only 4.5 percent in 2003 to a sizable
20.7 percent in 2006.15 The increase in such
payments—ACH payments arising from check
conversion—is the primary reason for the decline in

14. Traditionally, CCD transactions have been thought of as transfers initiated by large corporations to move funds between their own
accounts for internal business and financial purposes; as such, they are
not the focus of this article. However, a survey of members of the
Association of Financial Professionals (AFP) conducted by Dove
Consulting and the AFP in 2003 suggests that around half of CCDs are
payments between counterparties, and not just internal transfers. The
proportion of CCD value accounted for by payments between counterparties is unknown.
15. Coding for a third type of ACH payment arising from check
conversion—back office check conversion, SEC code BOC—took
effect in 2007; use of the code was not significant during the study
period.

A81

the average value of ACH payments (and of retail
ACH payments in particular).
While the number of CCD transactions rose
12.4 percent a year, the average value of a CCD
payment declined almost 9 percent in constant 2006
dollars over the period. The 2006 average value was
nearly one-fourth below the 2003 constant-dollar
average value. Changes in the use of CCD transactions are less understood than are changes in the use
of retail ACH payments. The decline in average value
may, for example, be a sign of growing use of such
transactions by smaller businesses, or a movement of
some very large ACH payments to on-us transactions
(internal to a depository institution) or to large-value
funds transfer systems.

Card Payments
The number of payments made by debit, credit, or
EBT card grew by 12.8 billion from 2003 to 2006,
reaching 48.1 billion and exceeding the number of
checks paid by 17.6 billion (table 1, chart 3). Debit
card payments grew more than payments of other
types, rising 9.7 billion over the period and contributing three times more to card growth than other types
of cards combined. By 2006, the number of debit card
payments (25.3 billion) exceeded the number of
credit card payments (21.7 billion).
The value of debit card payments in 2006 ($1.0 trillion), however, was less than half the value of credit
card payments ($2.1 trillion). The average value of
debit card payments declined to $39 in 2006, a
decrease of about $1 from 2003. The average value of
credit card payments rose to $98, an increase of about
$8 from 2003. In constant dollars, the average value
of a debit card payment decreased about 4 percent a
year, while the average value of a credit card payment
decreased only slightly (0.01 percent a year).
The decline in the constant-dollar average value of
debit card payments and the virtually flat growth in
the constant-dollar value of credit card payments
suggest that much of the growth of payments by cards
derived from payments of relatively small value—
payments that otherwise would quite likely have been
made in cash. Data reported by some card networks
suggest that a large share of card payments in 2006
were of relatively small value: an estimated 48 percent of combined debit and credit card payments
(almost 23 billion) were for amounts less than $25;
26 percent were for amounts less than $15; and
3 percent were for amounts less than $5.16 Of the
16. Estimates are based on data collected by Dove Consulting for
the Cash Product Office at the Federal Reserve Bank of San Francisco.

A82

Federal Reserve Bulletin h October 2008

Innovations in Electronic Payments
The 2007 electronic payment survey collected information about several significant types of ‘‘emerging payments,’’ including prepaid cards, online bill payments,
person-to-person Internet payments, contactless payments, and other, less frequently used types such as
proprietary ACH card payments, deferred payments, and
mobile payments (those made from portable electronic
devices such as a cellular phone).1
Electronic prepaid cards have become increasingly
important replacements for paper-based payment instruments and related devices, such as gift certificates, paper
tickets and tokens, and check-based rebates.2 A substantial number of prepaid cards are private-label, so-called
‘‘closed-loop’’ or ‘‘closed-system,’’ cards. This type of
card can be used only for purchases at, for example, a
merchant’s chain of stores (similar to private-label credit
cards) and are often given as gifts or used to access a
municipality’s public transportation system. About 3 billion payments, with a total value of $36.6 billion and an
average value of $12, are estimated to have been made in
2006 with private-label prepaid cards.3 These payments
are not included in national card payment totals. If they
were, they would add more than 6 percent to the number
of card payments nationwide in 2006.
General-purpose, so-called ‘‘open-loop’’ or ‘‘opensystem,’’ prepaid cards that can be processed on existing
general-purpose credit card or debit card networks also

1. Figures for prepaid card payments reported in this box are national
estimates because they include an estimated amount for the networks that
did not report. Figures for other emerging payments include only reported
amounts and therefore are lower bounds for the national totals. Data
collection and estimation are by Dove Consulting.
2. The term “prepaid” is associated with products for which the
prefunded value is recorded in a remote database that must be accessed for
payment authorization. The term describes most of the prefunded cards
currently in use in the United States. Most prepaid cards serve a single
purpose, but some may combine multiple functions on one card. In
addition, some prepaid cards, such as payroll cards, government benefit
cards, and some gift cards, can be reloaded with value. For more
information on prepaid cards and related business and regulatory concerns, see a summary of the November 12, 2004, Federal Reserve System
Payment System Development Committee (PSDC) roundtable on storedvalue cards at www.federalreserve.gov/paymentsystems/storedvalue/
default.htm.
3. About one-third of the total was reported directly; the remainder was
estimated on the basis of available information. Efforts were made to use
available information to keep estimates within reasonable boundaries, but
the amount of uncertainty is unknown.

more than 1.4 billion card payments made for amounts
of less than $5, the majority (53 percent) were debit
card payments authorized on the basis of a personal
identification number (PIN).
Although data from other years are not available, it
is likely that the share of relatively small payments

have been in use over the past decade.4 Uses include as
gifts and for new types of electronic benefit transfers
(including state-administered child support disbursement
programs and unemployment insurance), international
remittance payments, payment of health care expenses, and
payroll. An estimated 0.3 billion open-system prepaid card
payments, with a total value of $13 billion and an average
value of $41, were made in 2006.5 As the number of
closed-system prepaid card payments is estimated to have
been ten times the number of open-system payments and
the value three times that of open-system payments, it is
clear that closed-system cards have been relatively more
successful to date. The lower popularity of open-system
prepaid cards may be due in part to fees charged by
third-party issuers—designed to recoup costs—that are not
typically charged on closed-system cards, which are essentially issued by payees. These payments are included in,
but add an insignificant percentage to, national card payment totals and, depending on the network, are included in
either debit card or credit card payments.
The vast majority of card payments made within the
United States are still being made using magnetic stripe
technology. More advanced chip-based technology, though
available on so-called ‘‘smart cards’’ for years, remains in
limited use because merchants have not extensively adopted
terminals that can read them. Other technologies, such as
radio frequency identification (RFID), are also being used
for making payments on a limited basis. RFID technology
in the form of an electronic key fob has, for example, been
in use for more than a decade to make payments at the
retail outlets of one large oil company (Exxon-Mobil).6
Such devices can be used to initiate individual payments
from almost any debit card or credit card account. RFID
technology is also being used by highway authorities to
make toll transactions more convenient. At least 2 billion
payments, with a value of $3.6 billion, were initiated with
RFID transponders at toll authorities in 2006. Toll transponders (such as EZPass) carry a balance and typically are
4. Like debit cards that can be authorized with a signature, some prepaid
cards may bear the symbol of a major credit card network and may be used
like a credit card.
5. About one-third of the total was reported directly; the remainder was
estimated. Efforts were made to use available information to bound
estimates, but the amount of uncertainty is unknown.
6. The amount of use has not been reported.

has increased in recent years as card networks have
made infrastructure and policy changes that accommodate the needs of previously cash-only merchants.
For example, some quick-service restaurant chains,
including McDonald’s, began accepting cards at most
of their locations in 2004 because of improvements

Recent Payment Trends in the United States

automatically reloaded with a fixed amount once the
balance drops below a set limit.7
An RFID feature has also been added to existing smart
chip–based credit and debit card programs to create
‘‘contactless’’ cards such as MasterCard’s PayPass and
American Express’s Express Pay. These and similar cards
can be used at some gas stations, quick-service restaurants (for example, McDonalds), convenience stores (for
example, 7–11 stores), and pharmacy chains (for example,
CVS). Using this technology, a consumer is able to
initiate a payment through the major credit or debit card
networks by waving either a card or an electronic key fob
near a payment terminal—rather than by swiping a card
and authorizing by either PIN or signature—thereby
reducing the amount of time and effort required to make a
purchase. MasterCard reported that by the first quarter of
2008, the number of cards that included PayPass technology and the number of merchants accepting them both
had at least doubled in a year.8 While the number and
value of card payments initiated using this technology is
unknown, use is most likely still low at this time.
About 3.4 billion online bill payments, with a total value
of $1.2 trillion and an average value of $345, are estimated
to have been initiated from consumer banking websites in
2006. The first consumer banking websites allowing the
initiation of bill payment were reportedly introduced in the
mid-1990s, shortly after commercial use of web technology began to take hold. Since then, depository institutions
have increasingly offered websites capable of supporting
bill payment and other types of transactions. In early 2003,
fewer than half of commercial banks and state-regulated
savings institutions offered transactional websites, but by
early 2008, over 80 percent offered them; in early 2004,
only 43 percent of federally regulated savings institutions
offered them, but by early 2008, 73 percent did; and in
early 2003, 29 percent of credit unions offered them, but
by early 2008, 58 percent did.9
7. The reloading may be done automatically by means of credit card or
through the ACH, or by the customer initiating a payment by cash or
check.
8. Although growth was significant, the totals are small compared with
the total number of credit cards and the number of merchants that accept
them. See Daniel Wolfe and Marc Hochstein (2008), ‘‘PayPass Issuance,
Acceptance Double,’’ American Banker, vol. 178 (May 2), p. 8.
9. Data are from depository institution reports filed with the Federal
Reserve Board. These percentages represent upper bounds on the percentages of depository institution bill-payment websites because the share of
these transactional websites that offer bill payment is unknown.

allowing faster authorizations, new rules lifting signature requirements for low-value payments, and
lower fees for certain types of quick-service merchants.17
17. For details see, for example, W.A. Lee (2004), ‘‘How Cards
Finally Won Reluctant McDonald’s Over,’’ American Banker, vol. 169
(59), pp. 1–2.

A83

The number of payments initiated directly from billers’
own websites, rather than depository institutions’ websites,
is unknown. Industry research suggests that the number
was initially greater than the number of payments through
banking sites. Billers may credit accounts faster, and many
offer greater choice of payment instruments, allowing the
use of credit or debit cards while also offering payment
methods—such as online banking sites—that use the ACH
system (discussed above) or that generate a so-called
‘‘remotely created check’’ written by the payees’ bank.
Some studies also suggest that payments through online
banking sites could be growing faster than those made
directly at billers’ websites.10 Banks continue to work with
large billers to provide bill presentment along with payment for customers who use their online websites. In some
cases, switching to this payment method eliminates the
periodic mailing of paper statements as well as the return
of a check in the mail.
Over 0.5 billion emerging payments of other types, with
a value of about $35 billion and an average value of $67,
are estimated to have been made in 2006. A small number
were ACH payments initiated with proprietary, merchantissued cards (often associated with, for example, some
grocery store customer-loyalty programs), mobile payments, and deferred payments (such as those offered by
Bill Me Later for certain web purchases), but the vast
majority of these were person-to-person web payments.
The U.S. Department of Commerce estimates that Internet
(web) sales totaled about $128 billion in 2007, compared
with $28 billion in 2000. As a fraction of total retail sales,
e-commerce grew from less than 1 percent in 2000 to over
3 percent in 2007. Thus, while Internet commerce is
growing rapidly, it remains a small fraction of retail sales.
As e-commerce grows, new and innovative methods of
making electronic payments can also be expected to take
hold.

10. Several articles in American Banker, including the following, report
on some of these studies: Daniel Wolfe and Will Wade (2004), ‘‘CheckFree:
Consolidators Will Win E-Billing Battle,’’ May 21; Daniel Wolfe (2004),
‘‘Environment for EBPP Seen Shifting in Bankers’ Favor,’’ June 29; Steve
Bills (2004), ‘‘The Tech Scene: Instant Credit Gives Billers Big Edge in
Web Payment,’’ October 6; Chris Costanzo (2006), ‘‘Can Banks Catch Up
to Billers in Presentment?’’ March 28; and Steve Bills (2007), ‘‘CheckFree
Deal: A Biller Willing to Use Bank Sites,’’ December 7.

Debit Card Payments. Debit card payments typically are authorized either with a PIN or, if it carries
the Visa or MasterCard brand, by the cardholder’s
signature (like a credit card). In some cases, such as
when a purchase is made on a merchant’s website or
over the telephone, the cardholder is not required to
authorize the payment with a PIN or a signature.
Because such payments are processed on the same

A84

Federal Reserve Bulletin h October 2008

2. ACH transactions in the United States, by type of transaction, 2003 and 2006
Number
Type of transaction

Value

Billions of
transactions

Percent
of total

Trillions of
dollars

Percent
of total

Average,
in dollars

Percent returned

2003
Retail . . . . . . . . . . . . . . . . . . . . . . . . .
ARC . . . . . . . . . . . . . . . . . . . . . . .
POP . . . . . . . . . . . . . . . . . . . . . . . .
PPD . . . . . . . . . . . . . . . . . . . . . . . .
RCK . . . . . . . . . . . . . . . . . . . . . . .
TEL . . . . . . . . . . . . . . . . . . . . . . . .
WEB . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
CCD . . . . . . . . . . . . . . . . . . . . . . . . . .

7.3
.2
.2
6.0
*
.2
.6
.2
1.4

83.8
2.0
1.8
68.3
.3
1.7
7.0
2.6
16.2

8.1
.1
*
6.4
*
.1
.2
1.4
16.0

33.6
.2
*
26.6
*
.2
.7
5.8
66.4

1,106
296
70
1,072
155
374
291
6,239
11,272

1.5
.8
2.0
1.1
54.5
7.0
1.8
.2
.4

Total ACH transactions . . . . . . .

8.8

100.0

24.1

100.0

2,754

1.3

2006
Retail . . . . . . . . . . . . . . . . . . . . . . . . .
ARC . . . . . . . . . . . . . . . . . . . . . . .
POP . . . . . . . . . . . . . . . . . . . . . . . .
PPD . . . . . . . . . . . . . . . . . . . . . . . .
RCK . . . . . . . . . . . . . . . . . . . . . . .
TEL . . . . . . . . . . . . . . . . . . . . . . . .
WEB . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
CCD . . . . . . . . . . . . . . . . . . . . . . . . . .

12.6
2.3
.3
7.4
*
.4
1.7
.6
2.0

86.2
15.9
2.0
50.4
.2
2.4
11.3
4.1
13.8

12.1
.7
*
8.1
*
.1
.6
2.5
18.9

39.0
2.2
.1
26.2
*
.5
2.1
8.0
61.0

959
290
81
1,102
164
403
386
4,194
9,384

1.3
.4
1.7
1.1
57.6
6.5
1.5
.2
.4

Total ACH transactions . . . . . . .

14.6

100.0

31.0

100.0

2,121

1.1

Change
over period
(billions of
transactions)

Annual
rate of
change
(percent)1

Change
over period
(trillions of
dollars)

Annual
rate of
change
(percent)1

Change in
average
over period
(dollars)

Change
over period
(percentage
points)

Change, 2003 to 2006
Retail . . . . . . . . . . . . . . . . . . . . . . . . .
ARC . . . . . . . . . . . . . . . . . . . . . . .
POP . . . . . . . . . . . . . . . . . . . . . . . .
PPD . . . . . . . . . . . . . . . . . . . . . . . .
RCK . . . . . . . . . . . . . . . . . . . . . . .
TEL . . . . . . . . . . . . . . . . . . . . . . . .
WEB . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . .
CCD . . . . . . . . . . . . . . . . . . . . . . . . . .

5.3
2.1
.1
1.4
*
.2
1.0
.4
.6

19.8
137.6
22.1
7.2
–3.1
32.7
39.1
38.4
12.4

4.0
.6
*
1.7
*
.1
.5
1.1
2.9

14.3
136.0
28.2
8.2
–1.2
36.1
53.0
21.2
5.8

–147
–6
11
31
9
29
96
–2,045
–1,888

–.2
–.4
–.3
*
3.2
–.4
–.3
–.1
*

Total ACH transactions . . . . . . .

5.9

18.7

6.9

8.8

–633

–.2

Number

Value

Percent returned

NOTE: Retail ACH payments include payroll, bill payments, and some payments associated with the retail sector of the economy. ARC, accounts receivable check conversion; POP, point-of-purchase check conversion; PPD, prearranged payment and deposit; RCK, re-presented check; TEL, telephone
“e-check”; WEB, web “e-check.” CCDs are cash concentration or disburse-

ment transactions, about half of which are most likely internal corporate transfers. Components may not sum to totals and may not yield percentages shown
because of rounding.
1. Compound annual growth rate.
* In absolute value, less than 0.05.

networks as signature payments, they are included in
the figures for signature payments. Most debit cards
can be used not only to make payments, but also to
access an ATM network by entering a PIN.
The number of signature-based debit card payments in the United States grew from 10.3 billion in
2003 to 16.0 billion in 2006, for an annual growth
rate of 15.8 percent. The growth, which accounted for
most of the increase in debit card payments, reflects
incentives offered by issuing banks to users who
authorize payments with a signature rather than a
PIN. The average value of a signature-based debit
payment decreased from $42 in 2003 to $40 in 2006.
In constant 2006 dollars, the average value of a
signature-based debit payment was flat from 2000 to
2003 but dropped $6 from 2003 to 2006.

The number of debit card payments authorized
with a PIN grew from 5.3 billion in 2003 to 9.4 billion in 2006. In absolute numbers, growth was greater
for signature-based debit payments; but the rate of
growth was greater for PIN-based payments—20.6
percent a year versus 15.8 percent a year. The average
value of a PIN-based debit card payment declined
from $38 in 2003 to $37 in 2006. In constant 2006
dollars, the average value fell $12 from 2000 to 2003
and another $5 from 2003 to 2006.
When a debit card is used to make a purchase
authorized with a PIN, some merchants may, on
request by the user, return part of the payment in cash.
Debit card purchases involving the return of cash are
typically called ‘‘cash back’’ transactions. In such
cases, the value of the payment includes both the

Recent Payment Trends in the United States

value of the purchase and the value of the cash
returned. The values of PIN-based debit card payments for 2003 and 2006 reported above have been
adjusted to exclude an estimated portion of payment
value returned in cash.18 In 2006 an estimated 11.2 percent of PIN-based debit card payments involved the
return of cash to the card user, and an estimated
8.5 percent of the total value was returned as cash.19
For PIN-based debit card payments that involved
cash back, the value of the cash returned averaged
about $31.20
Credit Card Payments. Overall, the number of credit
card payments grew at a relatively modest 4.6 percent
a year from 2003 to 2006. The number of payments
made by general-purpose credit card (Visa, MasterCard, American Express, and Discover) rose from
15.2 billion to 19.0 billion over the period, for a
growth rate of 7.6 percent a year. The number of
payments made by private-label credit card, typically
issued by retail merchants and oil companies, dropped
to 2.8 billion in 2006, declining 9.6 percent a year
from 2003 to 2006. The decline may have been
influenced by an expansion of programs that co-brand
store cards with general-purpose credit cards.21
Users who have been issued a PIN with their credit
card can use the card to obtain a cash advance at an
ATM designed to accept credit cards. Credit cards are
used far less often than debit/ATM cards to obtain
cash. In 2006, the number of credit card cash advances, estimated at 87 million, amounted to 0.4 percent of total credit card payments and less than
0.8 percent of total credit card value.22 These figures
suggest that credit cards are probably used primarily

18. Estimates of amounts returned to card users in 2003 and 2006
were based on data provided by a few large debit card networks. The
amount returned in 2000 is unknown. Therefore, how much of the
decline in the average value of a PIN-based debit payment between
2000 and 2003 should be attributed to a decline in cash back, and how
much to a decline in average purchase value, is unclear. All of the
decline in average value between 2003 and 2006 can be attributed to a
decline in average purchase value.
19. Estimates are based on information from the few debit card
networks that were able to report the value of cash back and the
number of PIN-based debit payments that involved the return of cash.
20. Because cash back was reported as a separate aggregate, it is
not possible from the survey data to compare the average value of a
PIN-based debit card payment that involved cash back with the
average value of one that did not.
21. Payments by such ‘‘co-branded’’ cards are included in the totals
for general-purpose credit cards.
22. The estimated value does not include any cash given back by a
merchant as part of a credit card purchase at the point of sale. The
amount given back in this way is likely to be small, as the merchant
must pay the credit card network a percentage of the entire charge,
including a percentage of the amount of cash given back. At least one
very large merchant (Wal-Mart) reportedly allows up to $20 in cash
back on credit card purchases.

A85

to obtain cash in emergencies or when no other
effective alternative exists, most likely because of the
typically higher fees and lower limits on cash advances. The average value of such advances in 2006,
at $190, was considerably higher than the average
value of either ATM withdrawals or cash back on
debit card purchases.

TRENDS IN CASH PAYMENTS
Information on the use of cash for payments is
difficult to obtain directly. Data showing a large
increase in the number of card payments, in combination with reports that some formerly cash-only businesses are now accepting card payments, provide
some indirect evidence that cash is increasingly being
replaced by cards. Additional indirect evidence on the
use of cash comes from trends in cash obtained using
ATM, debit, and credit cards and from trends in per
capita currency in circulation.
The number of ATM withdrawals—data collected
as part of the 2004 and 2007 depository institution
surveys—dropped slightly between 2003 and 2006,
from 5.9 billion to 5.8 billion. The value of withdrawals rose, however, from $497 billion to $579 billion.
The average value of a withdrawal was $100 in 2006,
compared with $85 in 2003, for an annual rate of
growth of 5.6 percent (2.4 percent in constant dollars).
Industry reports indicate that the number of ATMs
in the United States more than tripled from 1995 to
2005 (growing at 12.5 percent a year) but dropped for
the first time in 2006.23 Industry data also indicate
that the number of ATM transactions overall—
including cash and check deposits, cash withdrawals,
electronic funds transfers, and balance inquiries—
grew from 1995 to 2004, though at a much slower
pace (1.4 percent a year). Reports that the number of
ATM transactions has declined since then are consistent with an increase in the number of debit card
purchases involving cash back as well as other factors, such as a decrease in the use of checks, some of
which would have been deposited at ATMs. The
number of daily cash withdrawals per ATM averaged
43 in 2003 but had dropped to 40 by 2006.
Consumers may have been replacing ATM withdrawals with cash-back transactions partly for conve23. The source for 1995–2003 information on the number of ATMs
is ‘‘Bank Network News and Debit Card News’’ (New York: Faulkner
and Gray). Information on ATMs for 2004–2006 is from ‘‘EFT Data
Book’’ (New York: Thomson Media). Also see Committee on Payment
and Settlement Systems (2008), Statistics on Payment and Settlement
Systems in Selected Countries: Figures for 2006 (Basel: Bank for
International Settlements, March) for a variety of statistics on currency
and other payment instruments (www.bis.org/publ/cpss82.pdf).

A86

Federal Reserve Bulletin h October 2008

3. Debits to transaction accounts held at depository institutions, by type and size of institution, 2007
Type and size of
institution (transaction
deposits in millions
of dollars)

Check payments1
Number of
institutions

Number
(billions)

ACH payments2

Value
(trillions of
dollars)

Average
value
(dollars)

Number
(billions)

Value
(trillions of
dollars)

Debit card payments
Average
value
(dollars)

Number
(billions)

Value
(trillions of
dollars)

Average
value
(dollars)

All institutions . . . . . . . .

13,316

29.38

41.164

1,401

18.07

142.688

7,896

30.35

1.244

41

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

106
225
475
12,510

17.34
2.50
1.92
7.62

30.679
2.752
1.848
5.883

1,770
1,100
963
772

13.05
1.26
.93
2.84

135.935
3.068
1.178
2.508

10,419
2,440
1,273
883

19.55
2.66
2.13
6.01

.812
.104
.085
.244

42
39
40
41

Commercial banks . . .

6,186

24.36

38.787

1,592

14.82

139.430

9,406

21.32

.887

42

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

86
141
320
5,639

16.09
1.85
1.34
5.09

29.820
2.432
1.564
4.970

1,854
1,315
1,167
977

11.95
.83
.57
1.47

134.011
2.675
.936
1.809

11,211
3,223
1,628
1,234

16.78
1.23
.98
2.34

.698
.049
.040
.100

42
40
41
43

Savings institutions . . .

1,072

2.28

1.588

696

1.57

2.643

1,684

3.33

.137

41

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

15
28
50
979

1.13
.24
.22
.70

0.807
0.175
0.167
0.439

715
741
752
631

.98
.16
.11
.32

1.886
.281
.147
.329

1,929
1,767
1,295
1,030

2.29
.30
.24
.49

.095
.012
.010
.020

41
41
41
41

Credit unions . . . . . . . . .

6,058

2.74

0.789

288

1.68

.615

367

5.70

.220

39

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

5
56
105
5,892

.12
.42
.36
1.84

0.052
0.145
0.118
0.474

430
348
329
258

.11
.27
.24
1.06

.039
.111
.096
.370

335
414
403
350

.48
1.13
.91
3.19

.019
.043
.035
.124

39
38
38
39

NOTE: Annualized figures based on survey data for March and April 2007.
Excludes institutions that had no transaction deposits. The number and value of
debits to transaction accounts are revised from figures reported in Federal Reserve System, “The 2007 Federal Reserve Payments Study.” See the appendix
for details. Components may not sum to totals because of rounding.

1. Checks paid, that is, checks that were on-us (involving only one depository institution) and checks processed through the interbank check-clearing
system, including original paper checks and truncated checks presented either
electronically or as paper substitute checks. Does not include U.S. Treasury
checks and U.S. Postal Service money orders.
2. Electronic payments processed through the automated clearinghouse system, including checks converted to electronic payments.

nience and partly to avoid ATM fees. Although the
number of ATM withdrawals has declined slightly,
growth in cash back from debit card purchases has
been quite strong. More than 1.0 billion PIN-based
debit card payments in 2006 involved a return of cash
to the card holder (average of $31), compared with
fewer than 0.6 billion in 2003.
The sum of the number of ATM withdrawals and
PIN-based debit card payments involving cash back
grew from 6.5 billion in 2003 to 6.9 billion in 2006.
As noted elsewhere, credit cards were used to obtain
cash advances a relatively small number of times in
2006 (87 million). The total amount of cash obtained
in 2006 from these sources—ATM withdrawals, cash
back from debit card purchases, and credit card cash
advances—was $628 billion.
Change in the constant-dollar value per capita of
low-denomination currency in circulation from 1960
to 2007 provides a long view of changes (chart 4).24
Generally, low-denomination currency has historically been used for making payments within U.S.

4. Value of low-denomination currency in circulation per
capita, 1960−2007

24. Currency in circulation—which includes all currency in the
possession of consumers, businesses, and banks, except the Federal
Reserve Banks, including vault cash and currency held inside ATMs—
reached $792 billion at the end of 2007.

NOTE: Includes $1, $2, $5, $10, and $20 notes.
SOURCE: Federal Reserve Board.

borders, while $50 and $100 notes have been used
primarily as stores of value both domestically and
abroad and have been used much less frequently for
domestic payments.25 The constant-dollar value of
low-denomination currency in circulation peaked at
25. An unknown and most likely small amount of lowdenomination currency is also used abroad.

Recent Payment Trends in the United States

A87

3.—Continued
ATM withdrawals

Total debits to transaction accounts

Number
(billions)

Value
(trillions of
dollars)

Average value
(dollars)

Number
(billions)

Value
(trillions of
dollars)

5.82

.579

100

83.62

3.59
.50
.42
1.30

.387
.045
.038
.109

108
90
90
84

53.53
6.92
5.40
17.78

3.89

.404

104

3.08
.22
.18
.42

.334
.019
.016
.034

109
89
90
82

.67

.067

.41
.07
.06
.13

MEMO

Average value
(dollars)

Transaction
deposits (billions
of dollars)

Total deposits
(billions of
dollars)

Total assets
(billions of
dollars)

185.7

2,220

843

7,177

11,196

167.8
6.0
3.1
8.7

3,135
863
583
492

474
74
65
230

4,430
670
481
1,596

7,585
952
624
2,036

64.40

179.5

2,787

658

5,590

8,952

47.90
4.12
3.07
9.31

164.9
5.2
2.6
6.9

3,442
1,255
833
743

409
48
44
158

3,911
468
303
909

6,740
672
402
1,138

99

7.85

4.4

565

95

958

1,507

.043
.007
.006
.011

104
95
93
90

4.81
.77
.64
1.63

2.8
.5
.3
.8

588
619
515
490

57
9
6
22

469
89
76
324

784
145
102
475

1.25

.108

86

11.37

1.7

152

89

629

737

.10
.21
.19
.75

.010
.019
.017
.063

96
89
89
83

.81
2.02
1.69
6.84

.1
.3
.3
1.0

146
157
156
151

8
17
14
50

50
114
102
363

61
134
120
423

around $700 per capita in the late 1960s and early
1970s and then dropped relatively quickly until 1980,
when it was around $500 per capita. Except for small
fluctuations and a brief spike in 1999 due to a
temporary increase in currency stock held at banks in
response to the threat of a so-called millennium bug,
the constant-dollar value of currency in circulation
per capita has been flat since 1980. It is possible,
though only speculation, that if recent trends continue, the per capita number of cash payments may
begin to decline in the near future.26

PAYMENTS AND WITHDRAWALS FROM
ACCOUNTS AT DEPOSITORY INSTITUTIONS
The 2004 and 2007 depository institution surveys
collected data on the number and value of several
types of debits to transaction accounts—including
check payments, ACH payments, debit card payments
(both signature-based and PIN-based), and ATM
withdrawals—from a representative sample of depository institutions of different types and sizes (table 3).27
The surveys provide enough information to study
trends and variation in account debits by type and size
26. For another look at trends in the use of cash, see Paul W. Bauer
and Daniel A. Littman (2007), ‘‘Are Consumers Cashing Out?’’
Federal Reserve Bank of Cleveland, Economic Commentary (October
1), www.clevelandfed.org/research/commentary/2007/100107.cfm.
27. Other means of debiting transaction accounts include internal
transfers within a depository institution, wires over large-value funds
transfer systems, and cash payments by tellers that do not involve a
check.

of institution and by region. Combined with another
survey conducted in 2006, enough information was
available to study trends and variation in the use of
electronic images and paper in check processing.
The estimates reported in this section are annualized from data for March and April of 2004 and 2007
and are referred to as 2004 and 2007 estimates.

Shares of Account Debits
among Depository Institutions
For purposes of estimation and data analysis, depository institutions were grouped by type—commercial
banks, savings institutions, and credit unions—and,
within each type, by size—largest, large, medium,
and small. Collectively, the largest institutions (those
with transaction deposits of $600 million or more)
continued in 2007 to pay (on their customer’s behalf)
the majority of account debits, with their shares of
each type of payment remaining nearly the same as in
2004. In 2007, this small group, comprising fewer
than 1 percent of the 13,316 depository institutions
that had transaction deposits at that time, held more
than 56 percent of total transaction deposits and paid
64 percent of account debits by number and more
than 90 percent by value (table 4). In fact, the largest
depository institutions paid most of the debits of each
payment type by both number and value. Among
types of account debits, the largest institutions’ share
by number was highest for ACH payments, at 72 percent, and smallest for checks, at 59 percent.

A88

Federal Reserve Bulletin h October 2008

4. Distribution of debits to transaction accounts among depository institutions, by type and size of institution, 2007
Percent
Type and size
of institution
(transaction
deposits in
millions of
dollars)

Number
of institutions

Check
payments1

ACH
payments2

Debit card
payments

ATM
withdrawals

Total debits
to transaction
accounts

Number

Value

Number

Value

Number

Value

Number

Value

Number

Value

MEMO
TransTotal
action
deposits deposits

Total
assets

All institutions . .

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

600 and above . .
200–599 . . . . . . . .
100–199 . . . . . . . .
0–99 . . . . . . . . . . . .

.8
1.7
3.7
93.8

59.0
8.5
6.5
25.9

74.5
6.7
4.5
14.3

72.2
7.0
5.1
15.7

95.3
2.1
.8
1.8

64.4
8.8
7.0
19.8

65.3
8.3
6.8
19.6

61.8
8.6
7.3
22.4

66.8
7.8
6.6
18.8

64.0
8.3
6.5
21.3

90.4
3.2
1.7
4.7

56.2
8.8
7.7
27.3

61.7
9.3
6.7
22.2

67.7
8.5
5.6
18.2

Commercial
banks . . . . . . . .

46.5

82.9

94.2

82.0

97.7

70.2

71.3

66.9

69.8

77.0

96.7

78.1

77.9

80.0

600 and above . .
200–599 . . . . . . . .
100–199 . . . . . . . .
0–99 . . . . . . . . . . . .

.7
1.2
2.8
41.9

54.7
6.3
4.6
17.3

72.4
5.9
3.8
12.1

66.2
4.6
3.2
8.1

93.9
1.9
.7
1.3

55.3
4.1
3.2
7.7

56.1
3.9
3.2
8.0

52.9
3.7
3.0
7.2

57.8
3.3
2.7
6.0

57.3
4.9
3.7
11.1

88.8
2.8
1.4
3.7

48.5
5.6
5.2
18.7

54.5
6.5
4.2
12.7

60.2
6.0
3.6
10.2

Savings
institutions . . .

8.0

7.8

3.9

8.7

1.9

11.0

11.0

11.6

11.5

9.4

2.4

11.3

13.3

13.5

600 and above . .
200–599 . . . . . . . .
100–199 . . . . . . . .
0–99 . . . . . . . . . . . .

.1
.3
.4
7.2

3.8
.8
.8
2.4

2.0
.4
.4
1.1

5.4
.9
.6
1.8

1.3
.2
.1
.2

7.6
1.0
.8
1.6

7.6
1.0
.8
1.6

7.1
1.2
1.0
2.2

7.4
1.2
1.0
2.0

5.8
.9
.8
2.0

1.5
.3
.2
.4

6.8
1.1
.8
2.7

6.5
1.2
1.1
4.5

7.0
1.3
.9
4.2

Credit unions . . .

45.4

9.3

1.9

9.3

.4

18.8

17.7

21.5

18.7

13.6

.9

10.6

8.8

6.6

600 and above . .
200–599 . . . . . . . .
100–199 . . . . . . . .
0–99 . . . . . . . . . . . .

*

.4
1.4
1.2
6.3

.1
.4
.3
1.2

.6
1.5
1.3
5.8

1.6
3.7
3.0
10.5

1.5
3.4
2.8
10.0

1.7
3.6
3.2
13.0

1.7
3.3
2.9
10.9

1.0
2.4
2.0
8.2

.1
.2
.1
.6

.9
2.0
1.7
5.9

.7
1.6
1.4
5.1

.5
1.2
1.1
3.8

.2
.6
44.6

*
.1
.1
.3

NOTE: Percentages based on annualized figures derived from survey data for
March and April 2007. Excludes institutions that had no transaction deposits.
The number and value of debits to transaction accounts are revised from figures reported in Federal Reserve System, “The 2007 Federal Reserve Payments
Study.” See the appendix for details. Components may not sum to totals because of rounding.

1. Checks paid, that is, checks that were on-us (involving only one depository institution) and checks processed through the interbank check-clearing
system, including original paper checks and truncated checks presented either
electronically or as paper substitute checks. Does not include U.S. Treasury
checks and U.S. Postal Service money orders.
2. Electronic payments processed through the automated clearinghouse system, including checks converted to electronic payments.
* In absolute value, less than 0.05.

By type, commercial banks, which serve a broad
range of customers, including consumers and large
corporations, held the majority of transaction deposits
(78.1 percent) and assets (80.0 percent) in 2007.
About 77.0 percent of account debits by number, and
96.7 percent by value, were paid from accounts at
these banks. The second largest type of depository
institution, as measured by both transaction deposits
(11.3 percent) and assets (13.5 percent), were savings
institutions, which generally serve consumer and
business customers, but not the largest corporations;
9.4 percent of account debits, representing 2.4 percent
of total account debit value, were paid from accounts
at these institutions. Credit unions, which generally
serve consumer customers rather than businesses, had
the smallest share of transaction deposits (10.6 percent) and assets (6.6 percent). Although they accounted for a larger proportion of account debits by
number (13.6 percent) than did savings institutions,
they accounted for a smaller proportion by value (less
than 1 percent).

As in 2004, the average value of account debits in
2007 varied with depository institution size. For ACH
payments in particular, a substantial amount of value
(93.9 percent) was concentrated at the largest commercial banks, compared with 66.2 percent by number. A substantial portion of this value can be explained by unusually high average ACH values at a
handful of institutions. As discussed later in the
section ‘‘On Us Payments,’’ much of this concentration in ACH value is from internal payments.
Generally, the average values of ACH and check
payments increase in tandem with increasing commercial bank size because of the greater presence of
large business customers at larger commercial
banks.28 The group with the lowest average values for
ACH and check payments was credit unions, which,
28. In 2000 the average value of checks written by consumers was
about $350, and by businesses, $1,700. These are the author’s own
estimates based on a study in which individual checks that could be
classified were sorted by payer. See Federal Reserve System (2002),
‘‘Retail Payment Research Project: A Snapshot of the U.S. Payments

Recent Payment Trends in the United States

as previously noted, typically do not handle transaction accounts for businesses. The average value of
debit card payments did not vary significantly with
depository institution type or size, while average
ATM withdrawals generally were larger at the largest
institutions.

Changes in Shares from 2004 to 2007
The share of checks paid by commercial banks
increased 2.6 percentage points from 2004 to 2007,
reaching 82.9 percent (despite a decline of almost
4.7 billion in the number of checks paid). The share of
checks paid by credit unions dropped 2.2 percentage
points over the period, to 9.3 percent. The share of
checks paid by savings institutions remained relatively flat, dropping only 0.4 percentage point. This
pattern—decreasing share of checks for credit unions,
which generally serve only consumers, and increasing
share for commercial banks, which serve businesses
in addition to consumers—provides evidence that
consumers’ use of checks is declining faster than
businesses’ use of checks. The decrease for credit
unions is due both to fewer checks being written by
credit union customers and to more of these customers’ checks being converted to ACH payments.
The share of ACH payments at savings institutions
increased markedly from 2004 to 2007 (from 4.9 percent to 8.7 percent) because of a relatively large
increase in the number of such payments at those
institutions (from 0.5 billion to 1.6 billion, about
45 percent a year). In contrast to the 3.8 percentage
point annual increase in share by number was a
0.6 percentage point annual decline in share by value,
leading to a steep drop in the average value of ACH
payments at savings institutions (26.4 percent a year).
A significant increase in the conversion of smallvalue consumer checks into ACH payments and a
decrease in the number of large-value ACH payments
reported (due to greater accuracy on the part of some
institutions) most likely were factors in these
changes.29

Distribution of
Depository Institutions’ Account Debits
Overall, in 2007 about 36 percent of account debits
were made by debit card, 35 percent were made by
check, 22 percent were ACH payments, and 7 percent

Landscape,’’ pp. 12–14, www.frbservices.org/files/communications/
pdf/research/RetailPaymentsResearchProject.pdf.
29. See the appendix for details on changes in reporting accuracy.

A89

were cash withdrawals from ATMs (table 5).30 The
distribution had changed substantially from 2004,
when 26 percent of account debits were made by
debit card, 51 percent were made by check, 15 percent were ACH payments, and 8 percent were cash
withdrawals from ATMs. In 2004, checks were the
predominant payment type at institutions of all types;
by 2007, debit cards had become the predominant
payment type overall, and predominant at credit
unions, savings institutions, and the largest commercial banks, while checks continued to be predominant
at smaller commercial banks.
At institutions of all types, check payments as a
proportion of all debits to transaction accounts declined between 2004 and 2007—from 43 percent to
24 percent at credit unions; from 47 percent to
29 percent at savings institutions; and from 53 percent to 38 percent at commercial banks.31 In 2007, as
in 2004, there was an inverse relationship between the
size of a given type of institution and its proportion of
the total that were check payments: generally, the
larger the institution, the smaller the share of checks
with respect to total account debits. For commercial
banks, the proportion of check payments at small
banks (those with less than $100 million in deposits)
was about 55 percent, and at the largest banks,
34 percent. The proportion of checks may be smaller
at larger depository institutions because larger institutions may provide for (and perhaps encourage) greater
use of ACH and debit cards. Larger depository institutions may also serve more-sophisticated or larger
customers that may be more willing or able than
less-sophisticated or smaller customers to take advantage of cost savings or other benefits afforded by other
types of payment.
In contrast to checks, ACH payments as a proportion of all debits to transaction accounts increased at
institutions of all types between 2004 and 2007—
from 9 percent to 15 percent at credit unions; from
8 percent to 20 percent at savings institutions; and
from 17 percent to 23 percent at commercial banks.
At commercial banks, the proportion of ACH payments by number increased with increasing size,
possibly because of greater use of ACH by large
corporate account holders. The proportion of ACH

30. The shares of account debits at depository institutions overall
differ from the shares of corresponding payments in total noncash
payments (as reported in table 1), mainly because debits to deposit
accounts include ATM withdrawals and do not include credit card
payments.
31. Generally, ACH and debit card payments grew as a proportion
of account debits between 2004 and 2007, and check payments and
ATM withdrawals declined as a proportion, across institutions of all
types and sizes.

A90

Federal Reserve Bulletin h October 2008

5. Distribution of debits to transaction accounts at depository institutions, by type of debit, 2007
Percent
Type and size of
institution (transaction
deposits in millions
of dollars)

Check payments1

ACH payments2

Debit card payments

Number

Value

Number

Value

Number

All institutions . . . . . . . .

35.1

22.2

21.6

76.8

36.3

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

32.4
36.2
35.5
42.9

18.3
46.1
58.7
67.3

24.4
18.2
17.1
16.0

81.0
51.4
37.4
28.7

Commercial banks . . .

37.8

21.6

23.0

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

33.6
44.8
43.7
54.7

18.1
47.0
61.2
71.9

25.0
20.1
18.7
15.7

Value

ATM withdrawals

Total debits to
transaction accounts

Number

Value

Number

Value

.7

7.0

.3

100.0

100.0

36.5
38.4
39.5
33.8

.5
1.7
2.7
2.8

6.7
7.2
7.8
7.3

.2
.8
1.2
1.2

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

77.7

33.1

.5

6.0

.2

100.0

100.0

81.3
51.7
36.6
26.2

35.0
29.8
31.8
25.1

.4
.9
1.6
1.4

6.4
5.2
5.7
4.5

.2
.4
.6
.5

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

Savings institutions . . .

29.1

35.8

20.0

59.6

42.4

3.1

8.6

1.5

100.0

100.0

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

23.5
30.8
34.7
42.6

28.5
36.9
50.7
54.9

20.3
20.7
17.7
19.6

66.6
59.1
44.6
41.2

47.7
39.1
38.1
30.0

3.4
2.6
3.0
2.5

8.6
9.4
9.5
7.8

1.5
1.4
1.7
1.4

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

Credit unions . . . . . . . . .

24.1

45.6

14.8

35.5

50.2

12.7

11.0

6.2

100.0

100.0

600 and above . . . . . . . .
200–599 . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . .

15.0
20.6
21.1
26.9

44.0
45.7
44.4
46.0

14.1
13.3
14.0
15.5

32.4
35.0
36.1
35.9

58.6
55.7
53.9
46.6

15.6
13.4
13.2
12.0

12.3
10.5
11.0
11.0

8.1
5.9
6.3
6.1

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

NOTE: Percentages based on annualized figures derived from survey data for
March and April 2007. Excludes institutions that had no transaction deposits.
The number and value of debits to transaction accounts are revised from figures reported in Federal Reserve System, “The 2007 Federal Reserve Payments
Study.” See the appendix for details. Components may not sum to totals because of rounding.

1. Checks paid, that is, checks that were on-us (involving only one depository institution) and checks processed through the interbank check-clearing
system, including original paper checks and truncated checks presented either
electronically or as paper substitute checks. Does not include U.S. Treasury
checks and U.S. Postal Service money orders.
2. Electronic payments processed through the automated clearinghouse system, including checks converted to electronic payments.

payments for savings institutions and credit unions
did not show a clear relationship with size.
The proportion of debit card payments in account
debits for credit unions was just over 50 percent,
higher than the proportion for savings institutions
(42 percent) and commercial banks (33 percent).
Similarly, the proportion of ATM withdrawals was
greater for savings institutions and credit unions—
9 percent and 11 percent, respectively—than for
commercial banks (6 percent). That debit card payments and ATM withdrawals are proportionally more
prevalent at credit unions than at other types of
institutions is not unexpected, given their base of
primarily consumer customers.
Estimates from the 2007 depository institution
survey indicate that signature-based debit card payments, at 19.1 billion (63 percent of total debit card
payments), were not quite twice as common as PINbased debit card payments, at 11.2 billion (37 percent
of total debit card payments). Estimates from the
2004 depository institution survey were in similar
proportion—11.7 billion (65 percent) signature-based
and 6.3 billion (35 percent) PIN-based. The ratio of
signature-based to PIN-based debit card payments
was roughly similar across institutions of different

types and sizes. There was, however, substantial
variation among responding institutions within size
and type categories.

Electronic and Paper Check Processing
The traditional method of collecting a check is to
deposit it at a depository institution, which, if the
check is drawn on a different institution (an ‘‘interbank check’’), then collects the funds by presenting
the original paper check to the institution responsible
for paying it, the ‘‘paying bank.’’ Presentment to the
paying bank is done either directly or through one or
more intermediaries or agents, such as a Federal
Reserve Bank or a private clearinghouse. Use of
original paper checks requires timely physical sorting
and transportation, often to remote, small-volume
locations, making this method of check clearing
relatively costly compared with modern electronic
methods.
As an alternative to the presentment of original
checks, some depository institutions have for decades,
by agreement, transmitted electronic information
about the checks they present. In this form of check
presentment—a method historically called electronic

Recent Payment Trends in the United States

A91

6. Checks paid by depository institutions, by form of presentment, and electronic checks deposited, 2007
Number
Item

Value

Billions of
checks

Percent of
interbank checks

Trillions of
dollars

Percent of
interbank checks

Average,
in dollars

Checks paid1 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interbank checks . . . . . . . . . . . . . . . . . . . . . . .
Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original . . . . . . . . . . . . . . . . . . . . . . . . . .
Substitute . . . . . . . . . . . . . . . . . . . . . . . . .
ECP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electronic . . . . . . . . . . . . . . . . . . . . . . . . . . .
Image . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MICR . . . . . . . . . . . . . . . . . . . . . . . . . . . .
On-us checks . . . . . . . . . . . . . . . . . . . . . . . . . .

29.4
23.3
16.7
13.3
3.0
.5
6.6
6.4
.2
6.1

...
100.0
71.7
56.9
12.6
2.2
28.3
27.5
.8
...

41.2
29.3
21.8
15.6
5.7
.6
7.5
7.4
.1
11.9

...
100.0
74.4
53.1
19.5
1.9
25.6
25.4
.2
...

1,401
1,256
1,303
1,172
1,936
1,064
1,137
1,161
280
1,958

Electronic checks deposited2
Client image . . . . . . . . . . . . . . . . . . . . . . . . . .
Branch/ATM image . . . . . . . . . . . . . . . . . . . .

1.4
2.1

...
...

2.5
2.0

...
...

1,697
927

MEMO
Checks converted to ACH . . . . . . . . . . . . . . . .

3.3

...

.8

...

260

NOTE: Annualized figures based on survey data for March and April 2007.
Excludes institutions that had no transaction deposits. The number and value of
checks are revised from figures reported in Federal Reserve System, “The 2007
Federal Reserve Payments Study.” See the appendix for details. Components
may not sum to totals because of rounding.
1. Does not include U.S. Treasury checks and U.S. Postal Service money
orders. A substitute check is a special paper copy of the original check. ECP is
electronic check presentment with a paper check to follow, also called

same-day settlement. Electronic checks do not involve presentment of a paper
check and include checks presented as images as well as checks presented using only data from the magnetic ink character recognition (MICR) line at the
bottom of the check.
2. Client images are checks remotely deposited electronically as images by
bank customers. Branch/ATM images are checks imaged either at an ATM or
within a branch and forwarded on for collection.
. . . Not applicable.

check presentment (ECP)—the paper checks are typically also delivered to the paying bank. But doing this
for all checks would require banks to obtain agreements with all counterparties—including a very large
number of institutions to which checks are presented
infrequently and in small volume. Further, as noted,
ECP typically includes the delivery of the paper
checks to the paying bank, limiting the amount of cost
savings that can be obtained. In the past, many
depository institutions preferred the status quo—
exchanging original paper checks, which increased
float for the paying bank—to adopting electronic
check-clearing methods.32 Thus, even with some
potential benefits, depository institutions and their
agents were unable to substantially expand the proportion of checks they presented electronically. In
2007, an estimated 0.5 billion checks were presented
by ECP (table 6).
With the changes governing check processing
resulting from the Check 21 law, banks may now
truncate all checks and replace them with electronic
images, presenting them electronically to paying
banks that agree or as paper substitute checks to those

that require paper.33 The Reserve Banks and some
private clearinghouses are facilitating the transition to
the use of electronics by offering incentives for
depositing electronic images of checks and accepting
electronic images for presentment.
The costs and benefits of adopting electronic check
image processing vary, are changing rapidly, and can
be influenced by a variety of factors. For institutions
that outsource some part of check processing, the
timing of adoption may depend on when correspondent banks or third-party processors adopt. Each
depository institution chooses a time to adopt on the
basis of the expected future costs and benefits of
adopting at that time. In the long run, all depository
institutions that process checks most likely will adopt
electronic image processing methods.
Survey data collected in 2006 and 2007 indicate
that there have already been rapid changes in the
number of checks deposited and presented electronically and in the percentage of depository institutions
accepting electronic image presentment. Data from
early 2007 show that at that time there were meaningful differences in the level of adoption of electronic

32. See James McAndrews and William Roberds (2000), ‘‘The
Economics of Check Float,’’ Federal Reserve Bank of Atlanta, Economic Review, vol. 85 (4th quarter), pp. 17–27, for a discussion of the
issues.

33. As noted in the introduction to this article, Check 21 (Check
Clearing for the 21st Century Act) removed a legal impediment to the
replacement, during the collection process, of paper checks with
electronic information (‘‘check truncation’’). Under Check 21, a
paying bank that does not accept electronic images of checks for
payment must accept a ‘‘substitute check.’’ For additional information,
see www.federalreserve.gov/paymentsystems/truncation/default.htm.

A92

Federal Reserve Bulletin h October 2008

7. Distribution of interbank checks paid by depository institutions, by form of presentment, 2007
Percent
Type and size of institution
(transaction deposits
in millions of dollars)

Paper
Number

Electronic
Value

Number

Total
Value

Number

Value

All institutions . . . . . . . . . . . . . . . . . . . . .

71.7

74.4

28.3

25.6

100.0

100.0

Commercial banks . . . . . . . . . . . . . . . .

69.8

73.7

30.2

26.3

100.0

100.0

600 and above . . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

69.2
84.3
72.2
65.6

73.9
83.6
68.4
69.6

30.8
15.7
27.8
34.4

26.1
16.4
31.6
30.4

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

Savings institutions . . . . . . . . . . . . . . . .

91.9

91.9

8.1

8.1

100.0

100.0

600 and above . . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

96.7
94.2
89.2
83.9

96.6
94.0
91.1
82.6

3.3
5.8
10.8
16.1

3.4
6.0
8.9
17.4

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

Credit unions . . . . . . . . . . . . . . . . . . . . . .

70.4

71.8

29.6

28.2

100.0

100.0

600 and above . . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

98.0
78.0
78.6
65.2

97.9
80.3
80.6
64.0

2.0
22.0
21.4
34.8

2.1
19.7
19.4
36.0

100.0
100.0
100.0
100.0

100.0
100.0
100.0
100.0

NOTE: Percentages based on annualized figures derived from survey data for
March and April 2007.

image processing among groups of institutions, revealing that the timing of adoption was related to institution size and type. However, there were also substantial differences between institutions within groups,
evidence that size and type are not the only important
indicators of the timing of adoption.
Monthly data also reveal that between the reference period of the 2007 survey (March and April) and
June 2008, the proportion of checks deposited with
and presented by the Federal Reserve Banks as
electronic check images increased substantially, as
did the proportion of institutions depositing and
receiving such images through the Reserve Banks.
The rapid increases reflect more-recent changes within
the interbank check-clearing system overall and suggest that the differences among groups of institutions
are less pronounced now. If, as expected, the rapid
adoption of electronic check image processing continues, the check-clearing system will become predominantly electronic within only a few years.34

Checks Paid, by Form of Presentment
A depository institution that requires presentment of a
paper check receives either the original check or, if
the check was truncated and replaced with an electronic image, a substitute check. Figures based on
data for March and April 2007 suggest that at that
time, an annualized 13.3 billion original interbank
34. Checks converted to electronic ACH payments and therefore
not processed within the check-clearing system are outside the scope
of this discussion.

checks and about 3.0 billion substitute interbank
checks were being presented (table 6).35 Another
6.6 billion interbank checks were being presented
electronically (28.3 percent of interbank checks).
Most of these (6.4 billion) were presented as images;
the remainder were ‘‘MICR presentments,’’ whereby
only limited information about the check (account
number and dollar amount) is provided to the paying
bank at the time of presentment.36 In all, an annualized 9.5 billion checks, or 40.9 percent of interbank
checks, were truncated and presented electronically
or as substitute checks in 2007.
Commercial banks and credit unions paid paper
and electronic interbank checks in about the same
proportions in 2007: roughly 70 percent paper and
30 percent electronic (table 7). Savings institutions, at
over 90 percent paper and fewer than 10 percent
electronic, paid a much smaller proportion of checks
electronically or as substitute checks.
For each type of depository institution, the proportion of checks presented to them electronically generally increased with decreasing size. One explanation
could be that small institutions are more likely than
medium-size and large institutions to use intermediaries, such as third-party processors or correspondent
banks, that take advantage of the economies of scale
and scope available with electronic check processing.
35. Another 0.5 billion checks were presented using ECP, that is,
same-day settlement with paper to follow.
36. Additional information, such as an image of the check, is not
routinely provided with MICR presentments but generally can be
provided on request.

Recent Payment Trends in the United States

Such intermediaries play an important role in the
adoption of electronic check image processing because they can help depository institution customers
adopt sooner by, for example, providing incentives
and standardized processes for receiving electronic
check image presentment. Smaller institutions may
also be better able to use ‘‘off-the-shelf’’ electronic
check processing solutions that can help speed adoption. Among commercial banks, the largest received a
high proportion of electronic check images compared
with large and medium-size banks. The largest commercial banks may have adapted their proprietary
check-processing systems to handle electronic check
presentments sooner because they have greater opportunities for cost savings from economies of scale and
scope and the capacity to manage multiple platforms.
When a depository institution adopts technology
enabling it to accept electronically presented interbank checks, the extra cost of simultaneously supporting two technologies (traditional paper and new electronic technology) creates incentives to stop
supporting paper technology.37 The survey data provide evidence that most depository institutions use
mainly one or the other technology. About 85 percent
of institutions received nearly all check presentments
in either paper or electronic form in April 2007. A plot
of survey respondents by the proportion of interbank
checks they received in electronic form reveals that
most respondents were concentrated at the tails of the
distribution, meaning that most responding institutions in the sample received almost all check presentments in one form or the other (chart 5). At least some
depository institutions, however, apparently supported both forms of check presentment, as an estimated 15 percent received between 10 and 90 percent
of interbank checks as truncated checks.38 Some of
these institutions may have continued the exchange of
local paper checks through clearinghouses when it
was cost effective to do so while receiving other
checks in electronic form, and some may have been in
the midst of a transition to receiving all interbank
checks electronically.
Overall, an estimated 42 percent of depository
institutions received at least some interbank check
presentments in electronic form (table 8).39 The pro37. Because a paper check presented over the counter at a bank may
not be refused, some paper processing is inevitable. But depository
institutions may create electronic images of any paper checks they
receive.
38. Depository institutions that receive some paper may or may not
create electronic images of the checks for internal processing purposes.
39. Estimates are based on the portion of complete survey responses
for check payments that did not require the use of imputed data (see
the appendix).

A93

5. Distribution of responding institutions by the proportion
of interbank checks they received in electronic form,
2007

NOTE: The proportion of interbank checks presented electronically to the
depository institutions ranged from 0 to 100 percent. In this chart, the range is
divided into deciles, and each bar shows the percentage of respondents whose
proportions fell within that increment. For example, the bar labeled decile 1
shows the percentage of depository institutions that reported receiving up to
10 percent of the interbank checks presented to them in electronic form.

portion receiving some or all checks in paper or
electronic form varied by size and type of institution.
About half of the largest and medium-size commercial banks received at least some electronic checks,
while about 40 percent of the large and small ones
did. For credit unions, the proportion of institutions
accepting electronic presentment increased with decreasing size, rising from about 25 percent of the
largest to 46 percent of the smallest. Only 17 percent
of the largest savings institutions received some
8. Depository institutions receiving interbank check
presentments in electronic form, 2007
Percent
Type and size of institution
(transaction deposits in
millions of dollars)

Some electronic

All electronic

All institutions . . . . . . . . . . . . . . . . . . .

41.6

24.4

Commercial banks . . . . . . . . . . . . . . .

40.8

22.0

600 and above . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50.9
38.6
50.6
40.2

.0
5.3
18.4
23.0

Savings institutions . . . . . . . . . . . . . .

25.6

16.1

600 and above . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16.7
50.0
35.3
24.5

.0
12.5
5.9
17.0

Credit unions . . . . . . . . . . . . . . . . . . . .

45.3

28.3

600 and above . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25.0
27.8
30.4
45.7

.0
11.1
13.0
28.7

NOTE: Percentages based on annualized figures derived from survey data for
April 2007.

A94

Federal Reserve Bulletin h October 2008

electronic checks, while about half of the large ones
did, and the proportion declined as size declined from
large to small.
An estimated 24 percent of depository institutions
reported receiving all interbank check presentments
in electronic form. (A depository institution reporting
that it received all check presentments electronically
may have designated a third-party processor, a correspondent bank, or a Reserve Bank as its presentment
point. Given that the probability of receiving a paper
check was still high during the survey period, that
designee likely received some paper checks, which it
forwarded to the customer as electronic images.)
None of the largest institutions of any type received
all checks in electronic form. Commercial banks and
credit unions showed a pattern of increasing proportions of institutions receiving all checks electronically
with decreasing size, while for savings institutions
there was no clear relationship between size and the
proportion receiving all checks electronically.
Credit unions as a group had the highest proportion
of institutions receiving at least some interbank
checks electronically (45 percent) and the highest
proportion receiving all electronically (28 percent).
Many credit unions traditionally have provided information about checks paid only as line-item entries on
customers’ bank statements and likely have faced the
fewest obstacles to receiving electronic information
in place of paper checks.40 The smallest credit unions
were more likely to accept some or all checks electronically than larger ones. Smaller institutions, including smaller credit unions, are more likely to use
correspondent banks, corporate credit unions, thirdparty processors, or Reserve Banks as their presentment point and to outsource some of the processing,
receiving all checks in electronic form. Thus, in some
cases the agent designated as the presentment point
may have received checks in paper form and sent
them to client institutions in electronic form.
While the use of electronic check processing methods was not universal in 2007, comparison with
earlier data shows that substantial growth had occurred over a period of one year. Estimates from a
survey conducted by the Board in 2006 show that an
annualized 2.4 billion checks were presented electronically in March 2006, implying year-to-year

growth of 273 percent. An annualized 1.0 billion
substitute checks were presented that same month,
implying year-to-year growth of 304 percent. The
proportion of depository institutions receiving electronically presented checks also increased substantially; overall, the proportion receiving some checks
electronically increased about 10 percentage points
and the proportion receiving all electronically, which
was relatively low in early 2006, increased about
16 percentage points from 2006 to 2007.
Other data show that electronic presentment of
checks processed by the Reserve Banks has increased
rapidly.41 Presentment of electronic check images to
depository institutions by the Reserve Banks, referred
to as FedReceipt, was first offered in 2005.42 The
percentage of FedReceipt checks in all checks presented by the Reserve Banks grew somewhat during
the initial months, reaching only 1.44 percent by
March of 2006 (chart 6). During March and April
2007, the same time period as the 2007 survey,
around 20 percent of checks presented by the Reserve
Banks were presented by electronic image, a lower
proportion than estimated for interbank checks overall (about 28 percent). The proportion of images in all
checks presented by the Reserve Banks was over
53 percent by June 2008, for an annualized growth
rate of 119 percent since the 2007 survey, likely
reflecting a high overall growth rate for check presentments using electronic images.

40. Commercial banks and savings institutions, after paying the
original canceled checks, have traditionally mailed them to account
holders along with their periodic statements. Many depository institutions of all types now offer access to check images on online banking
websites and have reduced the mailing of checks to customers. (In
2007, about three-fourths of commercial banks and two-thirds of
savings institutions had online banking websites capable of supporting
transactions; over half of credit unions did.)

41. The Reserve Banks are estimated to have processed 42 percent
of all interbank commercial checks processed in the United States in
2006, down from 54 percent in 2003.
42. Reported figures include electronic check images presented
using the FedReceipt and FedReceipt Plus products. FedReceipt users,
at no charge, received checks as electronic images or as paper,
depending on the way the check was deposited and processed.
FedReceipt Plus customers received all check presentments as images
and paid for imaging those checks that were not deposited as images.

6. Checks deposited and presented electronically through
the Reserve Banks, 2005−2008

SOURCE: Federal Reserve System Retail Payments Office.

Recent Payment Trends in the United States

Electronic Check Deposits
Some depository institutions have begun to allow
check depositors (businesses and even, perhaps, consumers) to truncate checks and make deposits by
sending electronic check images (known as ‘‘client
images’’) from a remote location rather than by
physically depositing the paper checks. During the
study period, 1.4 billion checks were deposited as
client images (table 6). Another means of check
electronification is for a depository institution to
image check deposits at special image-capable ATMs,
or at the branch at which the check was deposited,
and then forward the image on for collection. During
the study period, 2.1 billion checks were replaced
with such ‘‘branch/ATM’’ images. Collectively, these
methods of imaging check deposits remotely are
referred to as ‘‘remote deposit capture.’’
Depository institutions can also image checks at
their central processing locations, combine them with
any images deposited by customers or captured at
ATMs or branches, and electronically deposit an
electronic bundle of individual check images (known
as a cash letter) for collection through a Reserve
Bank, private clearinghouse, or third-party processor.
The 2007 survey did not collect information on
methods used for check collection, and industry-level
data are incomplete.
Depository institutions’ electronic depositing of
check images with the Reserve Banks, through FedForward, began in 2004 (chart 6). During March and
April 2007, the same time period as the 2007 study,
around 33 percent of checks deposited by Reserve
Bank customers were contained in electronic image
cash letters. The proportion of checks deposited by
electronic image with the Reserve Banks had grown
an annualized 93 percent since April 2007, reaching
about 74 percent by June 2008.
The number of checks deposited electronically
with the Reserve Banks has always led the number of
electronic checks presented, likely reflecting the transition costs to depository institutions before receiving
check presentments electronically and the lower
prices charged by the Reserve Banks and other intermediaries for electronic check deposits.43 Some paying banks may also prefer to receive paper check
presentments because they mail canceled paper checks
back to account holders along with periodic state43. Although prices for electronic check deposits were generally
lower than those for paper check deposits, they were higher if
substitute checks had to be created because the paying bank required
paper.

A95

7. Depository institutions depositing checks electronically,
and receiving checks presented electronically, through
the Reserve Banks, 2005−2008

SOURCE: Federal Reserve System Retail Payments Office.

ments. Until February 2008, the proportion of depository institutions depositing electronic check images
with the Reserve Banks had exceeded the proportion
receiving them (chart 7). In that month the proportions were about equal, and by June 2008 the proportion of depository institutions using FedReceipt
reached almost 81 percent, compared with 69 percent
using FedForward.
The figures indicate that the check-clearing system
is rapidly transitioning to electronic processes and
that the variation in adoption by size and type of
institution has most likely changed dramatically since
March and April 2007.

“On Us” Payments
Clearing and settlement of on-us payments—
payments that involve only one depository
institution—occurs internally at the depository institution, so many of the costs associated with coordinating payments with other depository institutions are
not incurred.44
Among depository institutions, commercial banks,
which typically have business customers, generally
had the highest proportion of on-us account debits, by
both number and value, while credit unions, which
typically do not have business customers, had the
lowest (table 9). Most checks involved a business and
44. For checks and ACH, ‘‘on us’’ means that the payer and the
payee use the same depository institution. For ATMs, the term means
that the withdrawal occurred at a proprietary ATM (an ATM owned by
the account holder’s depository institution). Data on on-us debit card
payments were not collected. On-us account debits plus interbank
account debits sum to total payments.

A96

Federal Reserve Bulletin h October 2008

9. Proportion of selected debits to transaction accounts at depository institutions that were on-us, 2007
Percent
Type and size of institution
(transaction deposits in
millions of dollars)

Check payments1
Number

ACH payments2

Value

Number

ATM withdrawals

Value

Number

Value

All institutions . . . . . . . . . . . . . . . . . . . . .

20.6

28.8

17.0

74.0

61.1

65.0

Commercial banks . . . . . . . . . . . . . . . .

23.3

29.7

17.6

74.6

68.4

71.4

600 and above . . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21.0
26.4
24.8
29.2

28.1
37.4
33.8
33.7

20.0
12.2
12.3
3.0

76.1
54.4
35.6
12.8

69.9
68.0
66.8
58.4

73.0
67.6
66.6
60.1

Savings institutions . . . . . . . . . . . . . . . .

12.0

19.0

28.1

60.7

62.7

65.5

600 and above . . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.9
12.9
12.4
13.3

18.2
19.1
19.1
20.4

36.1
27.8
12.0
9.3

69.3
51.6
38.4
29.5

65.4
64.8
59.2
54.3

68.7
67.3
61.8
54.2

Credit unions . . . . . . . . . . . . . . . . . . . . . .

3.7

6.8

1.1

1.6

37.6

40.9

600 and above . . . . . . . . . . . . . . . . . . . . .
200–599 . . . . . . . . . . . . . . . . . . . . . . . . . . .
100–199 . . . . . . . . . . . . . . . . . . . . . . . . . . .
0–99 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2
4.0
4.1
3.7

2.3
7.4
7.1
7.0

1.9
1.2
1.8
.9

1.6
1.5
1.8
1.5

52.4
48.2
44.8
30.8

51.7
49.8
47.2
34.9

NOTE: Percentages based on annualized figures derived from survey data for
March and April 2007. Excludes institutions that had no transaction deposits.
The number and value of debits to transaction accounts are revised from figures reported in Federal Reserve System, “The 2007 Federal Reserve Payments
Study.” See the appendix for details.

1. Checks paid, that is, checks that were on-us (involving only one depository institution) and checks processed through the interbank check-clearing
system, including original paper checks and truncated checks presented either
electronically or as paper substitute checks. Does not include U.S. Treasury
checks and U.S. Postal Service money orders.
2. Electronic payments processed through the automated clearinghouse system, including checks converted to electronic payments.

a consumer, so banks with both business and consumer customers were more likely to have on-us
payments.45
Overall, 21 percent of checks paid in 2007 were
on-us checks, about 2 percentage points lower than
the estimate from the 2004 depository institution
survey. The on-us proportion declined overall for
commercial banks and increased overall for savings
institutions and credit unions. Commercial banks had
a higher on-us proportion (23 percent) in 2007 than
both savings institutions (12 percent) and credit
unions (4 percent). In light of the dramatic growth of
check conversion, one possible explanation for increases in the proportion of on-us account debits at all
but the largest commercial banks and savings institutions is that smaller proportions of those institutions’
on-us checks were eligible-for-conversion consumerto-business checks.
The proportion of on-us ACH payments fell from
20 percent to 17 percent between 2004 and 2007. By
value, however, the proportion increased substantially, from 43 percent to 74 percent. For both years,
the estimated on-us proportion by value was overstated, apparently because a handful of very large
institutions included internal account-balancing and
settlement transactions, called offset entries, in their

reported ACH values. The increase in the proportion
by value was due to a change in the survey form,
which allowed the separate reporting of network and
on-us ACH volumes for 2007, leaving the overstatement to affect mainly the on-us amounts.46
Excluding the overstated ACH values, the largest
proportions of on-us account debits, by both number
and value, were consistently for ATM withdrawals.
Most check and ACH transactions involve payments
to other parties, who choose the depository institution
in which to deposit funds. In the case of ATM
withdrawals, the account holder plays the role of
payee and payer, choosing the depository institution
in both cases. Not surprisingly, therefore, these
account debits are more likely to be on-us. Between
2004 and 2007, the on-us portion of ATM withdrawals overall increased slightly, from less than 60 percent to over 61 percent by number, and from over
62 percent to 65 percent by value. For commercial
banks, more than 68 percent of ATM withdrawals

45. Gerdes and Walton, ‘‘The Use of Checks and Other Noncash
Payment Instruments.’’

46. Because the 2004 survey form intermingled interbank and
on-us figures, institutions that had problems distinguishing offset
entries appeared to have overestimated the value of both on-us and
interbank ACH. While offset entries continued to appear in the on-us
figures for 2007 and apparently have grown substantially larger for a
few very large institutions, network value was not as overstated in
2007 as it was in 2004, owing in part to clarification of the survey
instrument and to heightened efforts to inform survey respondents
through additional communications.

Recent Payment Trends in the United States

were on-us in 2007 (71 percent by value). The larger
on-us shares for ATM withdrawals also reflect account holder avoidance of the fees commonly charged
for using an ATM owned by another depository
institution or other company (non-proprietary ATMs).
Commercial banks generally have the largest networks of ATMs, making their ATMs more accessible
to customers. Even credit unions, which own relatively few ATMs and for which the on-us ratios for
checks and ACH were quite small, as a group had a
relatively large on-us share for ATM withdrawals of
38 percent (41 percent by value).

Regional Variation
Use of debit cards, checks, ACH, and ATM withdrawals differed among the four major regions of the
United States defined by the U.S. Census Bureau:
Northeast, South, Midwest, and West. Use of these
instruments also varied between urban and rural
locations.

Variation by Geographic Region
In 2007, the number of payments by check as a
proportion of total account debits ranged from a low
of 31 percent in the West to a high of 38 percent in the
South (table 10). The proportion of payments by debit
card ranged from a low of 33 percent in the Northeast
to a high of 42 percent in the West. While the
proportion of debit card payments nationwide (36 percent) was greater than the proportion of check payments nationwide (35 percent), by region that relationship held only in the West.47 In fact, in the West
the number of debit card payments exceeded the
number of check payments by almost 37 percent. The
proportion of ACH payments by number ranged from
a low of 20 percent in the South to a high of
25 percent in the Northeast. The proportion of ATM
withdrawals by number also was lowest in the South,
at 6 percent, and highest in the Northeast, at 8 percent.
In terms of value, check payments as a proportion
of total account debits ranged from a low of 14 percent in the West to a high of 33 percent in the South.
ACH payments followed the opposite pattern, accounting for a low of 66 percent of total account
debits by value in the South and a high of 85 percent
in the West. The opposite pattern was due mainly to
an especially high average ACH value in the West.
47. National data for 2006 show that the number of card payments
exceeded the number of check payments. However, data on the
regional use of credit cards are unavailable, so it is not possible to
assess the relative use of cards overall among regions.

A97

(The average ACH value ranged from a low of $5,211
in the South to a high of $13,381 in the West.) The
average value of check payments ranged from a low
of $1,226 in the Midwest to a high of $1,646 in the
Northeast. By contrast, the average value of debit
card payments differed little across regions, ranging
from a low of $39 in the Midwest to a high of $42 in
the Northeast and West. For ATM withdrawals, the
lowest average value was also in the Midwest, at $95,
and the highest was in the West, at $104.
Some differences across regions may be due to
differences in population size. The number of account
debits per capita in 2007 ranged from a low of 252 in
the South to a high of 304 in the Northeast (the
Midwest, at 303 account debits per capita, was a close
second).48 For debit card payments, the annual number per capita was highest in the West, at 119, and
lowest in the South, at 90. The annual value of debit
card payments per capita also was highest in the West,
at $4,987, and lowest in the South, at $3,675. For
check payments, the annual number per capita was
lowest in the West, at 87, and highest in the Midwest,
at 109. The value of checks per capita was also lowest
in the West, but it was highest in the Northeast. For
ATM withdrawals, both annual number and annual
value per capita were highest in the Northeast and
lowest in the South.
Other differences across regions may be due to
differences in economic output (defined as the sum of
gross state output for the states in the region). To
address this possibility, the regions were put on a
comparable basis by calculating payment figures in
terms of number or value of account debits per $1,000
of economic output. The number of account debits
per $1,000 of regional output in 2007 ranged from a
low of 6.0 in the South to a high of 7.3 in the
Midwest. The number of checks per $1,000 of economic output was lowest in the West, at 1.9, and
highest in the Midwest, at 2.6. The value of checks
per $1,000 of economic output was also lowest in the
West, at $2,806, but was highest the Northeast, at
$3,477.

Urban and Rural Variation
In 2007, both the total number and the total value of
payments were much smaller for rural areas than for
urban areas, reflecting the smaller population and

48. Note that per capita figures are based on the entire population
and include all payments, not just those made by consumers. Thus,
figures do not represent the behavior of adult consumers or heads of
household.

A98

Federal Reserve Bulletin h October 2008

10. Debits to transaction accounts at depository institutions, by geographic region, 2007
Northeast
Item

Multiregion

Single
region

South
All
institutions

Multiregion

Single
region

Midwest
All
institutions

Multiregion

Single
region

West
All
institutions

Multiregion

Single
region

Total
All
institutions

Multiregion

Single
region

All
institutions

Number
(billions) . . .

11.0

5.5

16.6

15.7

11.8

27.5

10.5

9.6

20.0

13.7

5.9

19.5

50.9

32.8

83.6

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

3.7
3.0
3.6
.8

2.0
1.2
1.8
.5

5.7
4.1
5.4
1.3

5.4
3.4
5.9
1.0

5.1
2.1
3.9
.7

10.5
5.5
9.8
1.7

3.4
2.9
3.6
.6

3.9
1.6
3.4
.7

7.2
4.5
7.0
1.3

4.0
2.9
5.8
1.0

2.0
1.0
2.4
.4

6.0
3.9
8.2
1.4

16.4
12.2
18.8
3.4

12.9
5.9
11.5
2.4

29.4
18.1
30.4
5.8

Value (trillions
of dollars) . .

29.9

3.3

33.2

33.3

9.9

43.2

41.9

5.3

47.3

56.8

5.3

62.1

161.8

23.8

185.7

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

7.7
21.9
.2
.1

1.7
1.5
.1
*

9.4
23.4
.2
.1

8.9
24.0
.2
.1

5.2
4.5
.2
.1

14.1
28.5
.4
.2

5.8
35.9
.1
.1

3.1
2.1
.1
.1

8.9
38.0
.3
.1

6.5
49.9
.2
.1

2.3
2.9
.1
*

8.8
52.8
.3
.1

29.0
131.7
.8
.4

12.2
11.0
.5
.2

41.2
142.7
1.2
.6

Distribution
by number
(percent) . . .

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

33.5
26.9
32.3
7.3

36.2
21.0
33.0
9.8

34.4
24.9
32.6
8.1

34.1
21.7
37.7
6.5

43.4
17.6
32.9
6.1

38.1
19.9
35.6
6.3

32.3
27.5
34.2
6.0

40.2
17.2
35.5
7.2

36.0
22.6
34.8
6.6

29.3
21.5
42.1
7.1

33.9
17.0
41.6
7.5

30.7
20.2
41.9
7.2

32.3
24.0
37.0
6.7

39.5
17.9
35.2
7.3

35.1
21.6
36.3
7.0

Distribution
by value
(percent) . . .

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

25.8
73.4
.5
.3

51.2
45.1
2.3
1.5

28.3
70.6
.7
.4

26.8
72.1
.7
.3

52.1
45.8
1.6
.6

32.6
66.0
.9
.4

13.8
85.7
.3
.2

57.8
38.6
2.4
1.1

18.7
80.4
.6
.3

11.5
87.9
.4
.2

42.9
54.3
2.0
.8

14.2
85.0
.6
.2

17.9
81.4
.5
.2

51.2
46.0
2.0
.9

22.2
76.8
.7
.3

Number per
capita . . . . . .

202

101

304

144

108

252

158

145

303

198

85

283

170

110

280

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

68
54
65
15

37
21
33
10

104
76
99
25

49
31
54
9

47
19
36
7

96
50
90
16

51
43
54
10

58
25
51
10

109
68
106
20

58
43
83
14

29
14
35
6

87
57
119
20

55
41
63
11

43
20
39
8

98
60
102
19

Value per
capita
(dollars) . . . . 546,933

60,329

607,262

305,563

91,302

396,865

634,262

80,374

714,636

821,110

76,335

897,445

541,738

79,760

621,498

Check . . . . . . . . 141,109
ACH . . . . . . . . . 401,403
Debit card . . . . 2,808
ATM . . . . . . . . . 1,612

30,868
27,195
1,381
885

171,977
428,598
4,190
2,497

82,006
220,289
2,252
1,016

47,540
41,781
1,423
558

129,546
262,070
3,675
1,575

87,532
543,611
2,130
990

46,461
31,049
1,968
896

133,993
574,659
4,098
1,886

94,669
721,467
3,454
1,519

32,717
41,488
1,532
597

127,387
762,955
4,987
2,116

96,959
440,938
2,605
1,236

40,824
36,672
1,561
702

137,784
477,611
4,166
1,937

Average value
(dollars) . . . .

2,702

596

2,000

2,119

844

1,573

4,013

554

2,358

4,152

901

3,177

3,181

727

2,220

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

2,081
7,379
43
109

842
1,279
41
89

1,646
5,665
42
101

1,667
7,045
41
108

1,013
2,197
40
85

1,348
5,211
41
98

1,717
12,516
39
104

797
1,245
38
86

1,226
8,405
39
95

1,634
16,933
41
109

1,140
2,879
43
93

1,470
13,381
42
104

1,762
10,804
41
108

942
1,864
40
88

1,401
7,896
41
100

lower economic output of rural areas (table 11).49
Check payments constituted 46 percent of debits to
transaction accounts in rural areas and 34 percent in
urban areas. In contrast, electronic debits—ACH and
debit card payments and ATM withdrawals—were
relatively more common in urban areas. Among electronic debits, the urban-rural difference was greatest
for debit card payments, which accounted for 37 percent of account debits in urban areas compared with
31 percent in rural areas.
For all types of account debits, the number and
value of payments per capita was higher in urban
areas, reflecting greater wealth and business activity.
The average value of debit card payments was
49. Note that by definition, rural areas include some suburban areas
surrounding cities.

roughly the same in urban and rural areas ($41 versus
$40), but the average value of check payments, ACH
payments, and ATM withdrawals was smaller in rural
areas.

Comparison with Earlier Findings
The annual number of check payments declined in all
regions between 2004 and 2007 (data not shown).
The most pronounced decline occurred in the
Midwest—almost 35 checks per capita. The smallest
decline was in the Northeast—over 21 checks per
capita. The number of checks declined faster in rural
areas over the period, at 10.7 percent a year, than in
urban areas, at 5.7 percent a year.
For debit card payments, the largest increase in the
annual number per capita was in the Northeast, at

Recent Payment Trends in the United States

A99

10.—Continued
Northeast
Item

Multiregion

Single
region

South
All
institutions

Multiregion

Single
region

Midwest
All
institutions

Multiregion

Single
region

West
All
institutions

Multiregion

Total

Single
region

All
institutions

Multiregion

Single
region

All
institutions

Number per
$1,000 of
output1 . . . . .

4.1

2.0

6.1

3.4

2.6

6.0

3.8

3.5

7.3

4.4

1.9

6.2

3.9

2.5

6.4

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

1.4
1.1
1.3
.3

.7
.4
.7
.2

2.1
1.5
2.0
.5

1.2
.7
1.3
.2

1.1
.5
.8
.2

2.3
1.2
2.1
.4

1.2
1.0
1.3
.2

1.4
.6
1.2
.3

2.6
1.6
2.5
.5

1.3
.9
1.8
.3

.6
.3
.8
.1

1.9
1.3
2.6
.4

1.3
.9
1.4
.3

1.0
0.4
0.9
0.2

2.2
1.4
2.3
0.4

Value per
$1,000 of
output
(dollars) . . . . 11,057
Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

2,853
8,115
57
33

1,220

12,277

7,294

2,179

9,473

15,260

1,934

17,194

18,090

1,682

19,772

12,309

1,812

14,121

624
550
28
18

3,477
8,665
85
50

1,958
5,258
54
24

1,135
997
34
13

3,092
6,256
88
38

2,106
13,079
51
24

1,118
747
47
22

3,224
13,826
99
45

2,086
15,895
76
33

721
914
34
13

2,806
16,809
110
47

2,203
10,018
59
28

928
833
35
16

3,131
10,852
95
44

Number-todeposits
ratio2 . . . . . .

95.5

96.5

95.8

127.6

72.7

96.4

124.9

81.7

99.7

124.1

79.6

106.3

117.6

79.9

99.2

Check . . . . . . . .
ACH . . . . . . . . .
Debit card . . . .
ATM . . . . . . . . .

32.0
25.7
30.9
7.0

34.9
20.3
31.8
9.5

33.0
23.9
31.2
7.8

43.5
27.7
48.1
8.3

31.5
12.8
23.9
4.4

36.7
19.2
34.4
6.1

40.3
34.3
42.8
7.5

32.8
14.1
29.0
5.9

35.9
22.5
34.7
6.6

36.4
26.7
52.2
8.8

26.9
13.5
33.1
6.0

32.6
21.4
44.6
7.7

38.0
28.2
43.5
7.9

31.6
14.3
28.1
5.8

34.9
21.4
36.0
6.9

Value-todeposits
ratio3 . . . . . . 258,098

57,506

191,675

270,333

61,401

151,632

501,318

45,293

235,101

515,268

71,682

337,579

374,115

58,094

220,312

Check . . . . . . . . 66,590
ACH . . . . . . . . . 189,423
Debit card . . . . 1,325
ATM . . . . . . . . .
761

29,424
25,922
1,317
843

54,283
135,282
1,322
788

72,551
194,891
1,992
899

31,971
28,098
957
376

49,496
100,130
1,404
602

69,185
429,668
1,684
782

26,183
17,497
1,109
505

44,081
189,051
1,348
620

59,408
452,740
2,168
953

30,723
38,959
1,439
561

47,917
286,990
1,876
796

66,958
304,504
1,799
853

29,735
26,711
1,137
511

48,842
169,306
1,477
687

1,958

162

2,120

4,385

265

4,650

4,705

308

5,013

1,859

205

2,064

12,907

940

13,847

...

...

...

...

...

...

...

...

...

...

299

...

...

2,700

...

...

4,562

...

...

2,749

...

...

3,138

...

...

13,149

57

173

162

285

117

201

74

184

410

843

Number of
institutions . .
Population
(millions) . . .
Output (billions
of dollars) . .
Transaction
deposits
(billions of
dollars) . . . . .

116

54.6

123

108.9

84

66.1

110

69.1

433

NOTE: Annualized figures based on survey data for March and April 2007.
Multiregion institutions are those that have deposits in more than one region;
single-region institutions have deposits in only one region. The Northeast region includes Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. The South region
includes Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia,
Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South
Carolina, Tennessee, Texas, Virginia, and West Virginia. The Midwest region
includes Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin. The West region
includes Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Ne-

vada, New Mexico, Oregon, Utah, Washington, and Wyoming. Components
may not sum to totals and may not yield percentages shown because of
rounding.
1. Output is measured as the sum of the gross state products in the region.
2. Annual number of debits per $1,000 of transaction deposits.
3. Annual value of debits per $1,000 of transaction deposits.
* In absolute value, less than 0.05.
. . . Not applicable.
SOURCES: Federal Reserve; and U.S. Department of Commerce, Bureau of
Economic Analysis and Bureau of the Census.

47.7 per capita, followed closely by the Midwest, at
46.5 per capita; the smallest increase was in the
South, at 31.3 payments per capita, followed by the
West, at 39.3 per capita. In 2004, the Northeast had
the lowest number of debit card payments per capita;
by 2007 that region, at 99 payments per capita, had
surpassed the South, at 90 per capita—but both
regions remained behind the Midwest, which at 106
payments per capita had come closer to the West, at
119 per capita. The proportion of account debits that
were debit card payments increased faster in rural
areas, at 14.4 percent a year, than in urban areas, at
11.9 percent a year.

RETURNED CHECKS AND ACH PAYMENTS
Some checks that are presented for payment are
returned unpaid because of insufficient funds, closed
accounts, fraud, or other reasons. The same is true for
ACH payments.50 Because some payments returned
for insufficient funds are presented again (‘‘represented’’), and may be returned yet again if funds
50. Credit card and debit card payments may fail because of credit
limits or insufficient funds, closed accounts, disputes, or fraud.
Because most card payments are approved in real time and are not
returned in the same sense as are checks and ACH payments, they are
outside the scope of this discussion.

A100

Federal Reserve Bulletin h October 2008

11. Debits to transaction accounts at depository institutions,
by urban or rural location, 2007
Item

Urban

Rural

Total

Number (billions) . . . . . . . . . . . . . . . . . .

72.2

11.4

83.6

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24.2
16.0
26.8
5.2

5.2
2.0
3.5
.6

29.4
18.0
30.4
5.8

Value (trillions of dollars) . . . . . . . . .

169.3

16.2

185.5

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36.2
131.4
1.1
.5

4.9
11.1
.1
.1

41.1
142.6
1.2
.6

Distribution by number (percent) . .

100.0

100.0

100.0

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33.5
22.2
37.2
7.2

45.9
17.7
31.0
5.4

35.2
21.5
36.3
6.9

Distribution by value (percent) . . . .

100.0

100.0

100.0

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21.4
77.6
.7
.3

30.1
68.7
.9
.3

22.2
76.9
.7
.3

Number per capita . . . . . . . . . . . . . . . .

298

201

280

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100
66
111
21

92
36
62
11

98
60
102
19

Value per capita (dollars) . . . . . . . . . . 699,174

286,358

620,961

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,619
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542,828
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
4,563
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,164

86,232
196,703
2,468
955

137,609
477,250
4,166
1,935

Average value (dollars) . . . . . . . . . . . .

2,344

1,424

2,219

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,497
8,215
41
101

934
5,532
40
88

1,397
7,915
41
100

Number-to-deposits ratio1 . . . . . . . . .

102.4

83.0

99.2

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34.3
22.7
38.0
7.4

38.1
14.7
25.7
4.5

34.9
21.4
36.0
6.9

Value-to-deposits ratio2 . . . . . . . . . . . . 239,919

264,263

220,122

Check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,341
ACH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,269
Debit card . . . . . . . . . . . . . . . . . . . . . . . . .
1,566
ATM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
743

35,602
81,210
1,019
394

48,781
169,179
1,477
686

Number of institutions . . . . . . . . . . . . . .
Population (millions) . . . . . . . . . . . . . . .
Transaction deposits
(billions of dollars) . . . . . . . . . . . . . . .

9,934
242.2

5,467
56.6

15,401
298.8

706

137

843

NOTE: Annualized figures based on survey data for March and April 2007.
Excludes institutions that had no transaction deposits. Urban areas are defined
as metropolitan statistical areas or New England county metropolitan statistical
areas, and rural areas as all other areas. Rural areas include some urbanized areas, such as outlying suburbs that surround metropolitan statistical areas. Components may not sum to totals and may not yield percentages shown because
of rounding.
1. Annual number of debits per $1,000 of transaction deposits.
2. Annual value of debits per $1,000 of transaction deposits.
SOURCES: Federal Reserve; and U.S. Department of Commerce, Bureau of
Economic Analysis and Bureau of the Census.

are still unavailable, the same returned payments may
have been counted more than once. Therefore, the
ratio of the number of times a payment, say a check,
is returned to the total number of check payments is
an upper bound on the probability that a check will be
returned.

Returned Checks
Checks were returned an estimated 187 million times
in 2003, compared with 153 million times in 2006. It
is estimated that check returns accounted for, at most,
0.51 percent of the estimated total number of checks
paid in 2006, or about 5.1 returns for every 1,000
checks paid—about the same proportion as in 2003—
compared with about 5.8 returns for every 1,000
checks paid in 2000.
Some checks returned for insufficient funds are
re-presented through the ACH system. When such
ACH payments, identified by SEC code as RCK
(‘‘re-presented check’’), are themselves returned, they
are returned through the ACH system and are no
longer identified as check returns. In 2006, about
21 million checks were re-presented through the ACH
system. More than half of these ACH check representments (about 12 million) were themselves
returned. The number and value of RCK ACH payments that were returned changed little between 2003
and 2006. The number of returned checks processed
through the check collection system (153 million) and
the ACH system in 2006 totaled close to 165 million,
or 5.5 returns for every 1,000 checks presented, also
virtually unchanged since 2003.

Returned ACH Payments
About 1.3 percent of retail network ACH payments
were returned in 2006, or 12.7 returns for every 1,000
payments, over twice the rate for checks (table 2).
Only about 0.4 percent of large-value CCD (cash
concentration or disbursement) transactions were
returned, a smaller proportion than for checks or retail
ACH payments. The percentage of retail ACH payments returned declined from 2003 (when it was
1.5 percent), while the percentage of CCD transactions returned remained flat.51 Most ACH returns in
2006 were PPDs (prearranged payment and deposit
entries), by far the largest type of ACH payment by
number, with a rate of 1.1 percent. The second and
51. The 2003 percentages for retail ACH payments and CCD
transactions referred to in this sentence are revised from those reported
in Gerdes and others, ‘‘Trends in the Use of Payment Instruments,’’
due to a revision to the estimate of total ACH payments and a change
in the method of calculation.

Recent Payment Trends in the United States

third most returns were for WEB (web e-check) and
TEL (telephone e-check) transactions, which had
return rates of 1.5 percent and 6.5 percent, respectively. RCK (re-presented check) payments had the
highest return rate, at 58 percent.
After having risen between 2000 and 2003, the
return rates for all types of ACH transactions examined except ACH RCKs declined between 2003 and
2006. The reversal may confirm anecdotal evidence
that in response to earlier increases in ACH fraud, the
banking industry stepped up measures to reduce the
incidence of fraud and to hold depository institutions
more accountable for customer abuse of the ACH
network. The declines suggest that such efforts are
having an effect on returns.

SUMMARY AND CONCLUSIONS
At some point between 2003 and 2006, the number of
payments made by credit or debit card in the United
States for the first time surpassed the number of
checks paid. And also for the first time, the number of
debit card payments surpassed the number of credit
card payments. Among the major payment types, the
greatest percentage increase, by number of payments,
was for payments made using the automated clearinghouse system, in part because of a rapid increase in
the conversion of checks into electronic ACH payments. The number of checks written continued the
decline observed in earlier periods, and the decline
accelerated because of ACH check conversion. By
2006, the number of payments made by electronic
means was twice the number of payments made by
check.
Later data show that by March and April 2007, the
number of debit card payments exceeded the number
of check payments. Debit card payments accounted
for more than half of all debits to transaction accounts
at credit unions, which serve mainly consumer customers, while checks continued to be predominant at
commercial banks, which also serve business customers. The number of debit card payments per capita in
the Northeast and Midwest regions had begun to
catch up to the West, while growth in the South
lagged by comparison.
Electronic methods of check clearing are rapidly
replacing traditional paper methods. From early 2006
to early 2007, the number of checks presented electronically tripled. The number of substitute checks—
which are created for banks that demand paper after a
check has been replaced with an electronic image—
also tripled during the period. The creation of substitute checks allows banks to electronify their processes even if their paying bank counterparties are not

A101

ready to do so. In the first quarter of 2007, about
41 percent of interbank checks were electronified for
some part of the check-clearing process (28 percent
were presented as images, and 13 percent were
presented as substitute checks). More recent data
show very rapid increases in the proportions of
checks presented by and deposited with the Federal
Reserve Banks as electronic images.
Implementation of changes that enable the electronic processing of checks requires the commitment
and coordination of substantial resources. Depository
institutions, third-party processors, and the Reserve
Banks have been investing in new technological
capabilities to support electronic check processing.
Despite the substantial cost of making the transition,
electronic processing of checks is moving ahead at a
rapid pace.
Changes in payments behavior are due to a number
of factors, including technology, preferences, and
costs as well as the regulations, policies, and practices
that govern the payments system. The recent rapid
growth in electronic payments was supported by a
very long buildup of technical infrastructure and by
spreading acceptance of traditional electronic payment instruments. Legal and regulatory changes have
removed significant barriers to the growth of electronic payments. Against this backdrop, rapid changes
in the payment system will likely continue through
the rest of this decade—and into the next.

APPENDIX: SOURCES OF DATA AND
METHODS OF ESTIMATION
Recent estimates of the number and value of noncash
payments came from two surveys conducted in
2007—one of depository institutions (the 2007 depository institution survey) and the other of electronic
payment networks, card issuers, and card processors
(the 2007 electronic payment survey). Similarly, the
estimates for earlier years came from 2004 and 2001
surveys of depository institutions (the 2004 and 2001
depository institution surveys) and electronic payment networks, card issuers, and card processors (the
2004 and 2001 electronic payment surveys).52
52. The 2001, 2004, and 2007 surveys were conducted by the Retail
Payments Office at the Federal Reserve Bank of Atlanta in collaboration with Board staff. Global Concepts assisted with all three depository institution surveys; in addition, International Communications
Research (ICR) assisted with the 2007 and 2004 surveys, and Westat
assisted with the 2001 survey. Dove Consulting assisted with all three
electronic payment surveys.
The report of the 2007 depository institution survey, ‘‘The Depository Institutions Payments Study: A Survey of Depository Institutions
for the 2007 Federal Reserve Payments Study’’ (March 2008), and the
report of the 2007 electronic payment survey, ‘‘The Electronic Pay-

A102

Federal Reserve Bulletin h October 2008

The 2004 and 2007 depository institution surveys
were similar in most respects. However, the 2007
survey collected additional information on paper and
electronic methods of clearing checks. In this article,
that additional information is compared with information on methods of clearing checks collected by the
Board in a 2006 survey on check losses incurred by,
and the funds availability and check-clearing practices of, depository institutions.53 The 2001 depository institution survey collected information only
about checks and did not collect information about
other debits to transaction accounts.

2007 Depository Institution Survey
Survey Design
The 2007 depository institution survey collected
information from three types of institutions: commercial banks (including agencies and branches of foreign banks); savings institutions (savings banks and
savings and loan associations); and credit unions.
Information was collected on several types of debits
to transaction accounts: checks paid, ACH payments,
debit card payments (both signature-based and PINbased), and ATM withdrawals. (Large-value transfers
and teller window withdrawals, which create debits,
as well as credit card and currency payments were
outside the scope of the survey.)
Depository institutions were asked to report, via
questionnaire, the number and dollar value of debits
to their accounts, by type of debit, during each of the
months March and April 2007. They were also asked
to report the number and value of returned checks
and, for all debit types except debit card payments,
the number and value of on-us debits (debits for
which the payee’s account and the payer’s account
are at the same depository institution). As noted
earlier, detailed information about methods of check
clearing was requested, including number and value
of checks presented by form of presentment (paper,
either original or substitute, and electronic, either
image or MICR line) and number and value of
deposited checks (with number of client images and
branch/ATM images identified separately).
ments Study: A Survey of Electronic Payments for the 2007 Federal
Reserve Payments Study’’ (March 2008), as well as documents related
to the earlier surveys, are available at www.frbservices.org/
communications/payment_system_research.html.
53. The 2006 survey was conducted by the Board for a report to
Congress. See Board of Governors of the Federal Reserve System
(2007), Report to the Congress on the Check Clearing for the 21st
Century Act of 2003 (Washington: Board of Governors, April),
www.federalreserve.gov/boarddocs/RptCongress/check21/
check21.pdf.

The population from which the 2007 sample was
drawn comprised 13,319 depository institutions (bank
subsidiaries of multibank holding companies were
treated as a single entity) that reported transaction
deposits greater than zero as of September 2006 (June
2006 for credit unions). Based on experience with the
2001 and 2004 depository institution surveys, which
had overall response rates higher than 50 percent, a
stratified random sample of 2,700 depository institutions was estimated to be needed to produce national
estimates of the number and value of debits made via
check with a desired precision of at least ±5 percent at
a 95 percent level of confidence.
For sampling and estimation purposes, depository
institutions were separated into four groups—
commercial banks; credit unions; and two types of
savings institutions, those federally regulated by the
Office of Thrift Supervision and those regulated by
states.54 The largest institutions in each group, as
determined by the value of their transaction deposits,
and some institutions known to have highly unusual
check volumes, such as issuers of rebate checks, were
sampled with certainty, meaning that all were included in the sample. The remaining institutions in
each group were then stratified by the value of their
transaction deposits—eight strata for commercial
banks, seven strata for credit unions, and ten strata for
savings institutions (five for federally regulated and
five for state regulated).
The final sample allocation was determined so as to
minimize the approximate standard error of the estimated total number of checks. Because the strata
containing the larger depository institutions typically
accounted for more paid checks in the 2001 and 2004
samples and had greater variance, they were assigned
a larger proportion of the sample. The allocation of
the sample between the institution types gave more
weight to commercial banks because they were
expected to account for a disproportionate share of
checks and other account debits, but it also took into
account the desirability of producing estimates by
depository institution type.
In all, 1,554 commercial banks, 333 savings institutions, and 813 credit unions were included in the
sample. Responses were received from 853 commercial banks (including all of the 38 largest), 191
savings institutions (including the 18 largest), and

54. The 2001 and 2004 surveys included a fifth group—
domestically chartered branches of foreign banks. Those institutions
had low rates of response and collectively accounted for a very small
number and value of payments, and it was determined that they could
be excluded from the 2007 survey without a significant loss of
information.

Recent Payment Trends in the United States

393 credit unions (including the 5 largest), for a total
of 1,437 respondents.
By the time survey responses had been received,
later data on transaction deposits—data as of
March 31, 2007—had become available. Using those
later data, the sample and population were restratified
to produce estimates for the 13,316 depository institutions that reported transaction deposits greater than
zero as of April 30, 2007, the end of the period for
which data were collected. The major change resulting from the restratification was an adjustment to the
largest size stratum for each depository institution
group so that it would be a certainty stratum (that is,
all members of the stratum must have responded to
the overall survey, although not necessarily to each
item). Strata also changed somewhat because of the
entry and exit of some institutions between November 2006, when the sample was drawn, and April
2007, and also because of changes in the value of
transaction deposits between September 2006, when
transaction deposits used for the sample were reported, and March 2007.

Item Nonresponse and Imputation
Each respondent was asked to provide four figures
(number and value for March and April of 2006) for
each item in three questionnaire sections—16 items
concerning checks, 9 concerning ACH payments, and
5 concerning ATM withdrawals and debit card
payments—for a total of 120 figures. With 1,437
institutions responding overall, there was a potential
for 172,440 completed figures.
Each item included in the survey had logical
relationships with other items. For example, groups
of subtotals should add up to—or, for incomplete sets,
be less than—totals; and number-value pairs should
not have a zero amount accompanied by a nonzero
amount. In order to use the variety of standard
statistical methods that require a rectangular dataset
and to make the estimates adhere to logical relationships, missing figures needed to be estimated using a
statistical process called imputation. Prior to imputation, responses were checked, and for any violations
of identified logical constraints, respondents were
contacted and, when appropriate, data edits were
made. In most cases in which logical inconsistencies
could not be resolved, figures were considered missing and subsequently were imputed.
Of the 1,437 respondents, one-fourth provided all
the requested figures, half reported at least 70 percent
of the figures, and about two-thirds reported at least
33 percent of the figures. Almost all of the remaining
one-third reported only 8 percent or fewer of the

A103

requested figures. As a result, some responses were
not complete enough to produce reliable imputed
figures.
Because some respondents were able to provide
reasonable responses for some survey sections but not
for others, imputation and estimation was conducted
by section. For the checks section to be considered
‘‘complete’’ (that is, eligible for the imputation process), a response was needed for at least one of the
four figures for total paid checks. A total of 1,281
responses met this criterion, for a potential of 81,984
figures; of these, 34,597 figures (42 percent) were
missing and were imputed. For the ACH payments
section, a response needed to provide at least one
figure for number of network or on-us ACH debits or
credits to be considered complete. (A response providing value figures only was not deemed sufficient
because some respondents’ total ACH value was
known to be overstated due to problems distinguishing ACH payments from other types of transactions,
as reported elsewhere in this appendix.) A total of
1,287 responses met this criterion, for a potential of
46,332 figures; of these, 19,232 figures (42 percent)
were missing. For the ATM/debit card section, a
response needed to provide at least one number or
value for total ATM withdrawals, PIN-based debit
card payments, or signature-based debit card payments to be considered complete. A total of 904
responses met this criterion, for a potential of 18,080
figures; of these, 2,146 figures (12 percent) were
missing.
For imputation, respondents were grouped by type
(commercial bank, savings institution, or credit union)
and a matrix of covariances between figures in each
section was estimated using a method that produces
maximum-likelihood estimates in the presence of
missing data through the use of an iterative technique
called the EM algorithm.55 A value was imputed for
each missing figure, and after adjustments were made
to ensure that logical relationships were not violated,
the imputed values produced on the final iteration of
the EM algorithm were used for estimation. The
imputation model for each missing figure was a linear
regression on a related figure from 50 other respondents closest in size as measured by value of transaction deposits. Imputations were performed in a hierarchical fashion, by filling in totals first, followed by
subtotals. Independent variables for the regressions
were selected by identifying the closest reported

55. For information on the technique, see Roderick J.A. Little and
Donald B. Rubin (2002), Statistical Analysis with Missing Data, 2nd
ed. (Hoboken, N.J.: Wiley), sections 11.2.1–11.2.2 (pp. 223–25).

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Federal Reserve Bulletin h October 2008

figure in a set of four or, if a subtotal was to be
imputed, a total within a logical relationship.
Each fitted regression yielded a predicted value and
an associated standard deviation for the missing item.
Six datasets containing both actual responses and
imputations were created. The first dataset contained
imputations that used the predicted, or expected,
value only. To arrive at an imputed value for the other
five datasets, a random deviate was added to the
predicted value, drawn from a normal distribution
having a mean of zero and the standard deviation
from the fitted regression. This imputation procedure
was repeated five times, each time using a newly
drawn deviate in the calculation, to create the five
additional datasets. All the summary statistics based
on the 2007 depository institution survey are estimates calculated from the first dataset. The variation
among the estimates calculated using the other five
datasets provided information about the uncertainty
in the overall estimate arising from the imputations
and was used to compute standard errors.

Estimation
The actual and imputed data for respondents were
converted to estimates for the population using a
separate ratio estimator for each stratum, with the
value of transaction deposits being the covariate for
each item. That is, for a given item and within a
stratum, the sum of the respondents’ data was multiplied by the ratio of the transaction deposits in the
population to the transaction deposits at the responding institutions. The associated sampling standard
error was based on a classical statistical formula that
accounts for the uncertainty arising from the use of a
sample rather than a census, and on the variation
among imputed figures that accounts for the uncertainty arising from the fact that some items needed to
be imputed.
The 95 percent confidence intervals for the national
estimate of checks were ±1.9 percent of the number
of checks paid and ±2.3 percent of the value of checks
paid. Both confidence interval half-widths were just
one-tenth of one percentage point larger than those
for the 2004 estimates, despite having used data from
fewer respondents (1,281 versus 1,501). The confidence intervals for the national estimates of other
account debits were generally larger than those for the
2004 depository institution survey.
Estimates by Geographic Region and by Urban or
Rural Location of Deposits. Although the survey
was not explicitly designed to facilitate geographic
analysis of account debit patterns, the responses were

sufficient, when combined with external data on each
depository institution’s total deposits distributed by
region, to make broad comparisons possible. For each
of four regions—Northeast, South, Midwest, and
West—separate estimates were calculated for singleregion depository institutions (those having deposits
in only one region) and multiregion depository institutions (those having deposits in more than one
region).
The survey did not directly collect regional data
from multiregion depository institutions. Information
on the distribution of each depository institution’s
total deposits (transaction plus savings deposits) was
available, so each type of account debit for each
multiregion depository institution in the population
was assumed to be distributed across regions in
proportion to the location of the institution’s deposits,
and its data were allocated to regions accordingly.56
Separate estimates were produced for each region
using the data from single-region depository institutions and the allocated portion of multiregion depository institutions. New, separate ratio estimators were
produced following the procedure described in the
preceding section. It turned out that national estimates
obtained from aggregating these regional estimates
were about the same as those obtained from the
original analysis.57 For presentation purposes, any
difference was proportionally allocated to the regional
estimates so that the sums of the regional estimates
added up precisely to the national estimates.
The assumption that the payments and transaction
deposits of depository institutions are regionally distributed in proportion to the distribution of their total
deposits is consistent with the hypothesis that customers of multiregion depository institutions are more
similar to each other in their payments behavior, even
when they are located in different regions, than they
are to customers of different depository institutions.
To put it another way, the regional estimates assume
that the regional fractions of a depository institution’s
customers exhibit similar payments behavior. While
no better alternative for constructing regional estimates appears to exist given available data, the
assumption could affect the accuracy of regional
estimates, as the allocation of transaction deposits (or
account debits) would be too large (too small) for a
region if the actual ratio of total deposits to transac-

56. For credit unions, the geographic distributions of an institution’s branches served as a proxy for the geographic distribution of its
total deposits.
57. Differences between the sum of regional estimates and the
corresponding national estimates did not exceed 1 percent.

Recent Payment Trends in the United States

tion deposits (or account debits) for a multiregion
institution was higher (lower) in that region.
The uncertainties that arise from allocation of data
to regions described above cause difficulties for the
statistical analysis of the estimated differences among
regions. Sampling standard errors were, therefore, not
calculated for the regional estimates.58
Estimates of urban and rural debit activity were
constructed using a method similar to that used to
construct regional estimates. Urban areas were defined as metropolitan statistical areas, and rural areas
as all other areas. Thus, some urbanized areas, such as
some outlying suburbs that surround metropolitan
statistical areas, were included in the rural regions.

2007 Electronic Payment Survey
For the 2007 electronic payment survey, questionnaires were sent to all 73 well-established electronic
payment networks, card issuers, and card processors
in order to estimate the number and value of electronic payments originated in the United States in
2006 by means of commonly used payment
instruments—general-purpose and private-label credit
cards, signature-based and PIN-based debit cards,
ACH payments, and electronic benefits transfers.
Electronic payment networks, card issuers, and
card processors can generally supply accurate data on
the number and value of the payments they process
from business records, and 89 percent of established
entities responded with information. Known information on nonrespondents showed that, collectively, the
number and value of payments processed by this
group were likely very small. An informal method
based on publicly available information was used to
estimate number and value of payments for nonrespondents; overall, the estimated portion of the total
for nonrespondents was 0.2 percent by number and
0.1 percent by value.59
Questionnaires were also sent to 33 emerging
payments companies that handle online bill payment
transactions, RFID transponder–initiated payments,
and a variety of other kinds of payments that appear
to have potential for growth in the United States, such
as person-to-person Internet payments, proprietary
cards issued by merchants that can initiate an ACH
payment, mobile payments, and deferred payments.
Surveys were returned by 16 companies. Number or
58. For additional details on the regional estimates see Gerdes and
others, ‘‘Trends in the Use of Payment Instruments.’’
59. Because of the informal estimation approach, no statistical
method of estimating uncertainty was available. Public information
about nonrespondents, however, suggests that the number and value of
payments they process constitute very small portions of the totals.

A105

value of payments for nonrespondents was not estimated, so reported totals for emerging payments are
lower bounds for the national totals.
For the 2006 estimates, special efforts were made
in estimating the number and value of payments using
prepaid cards. A total of 52 prepaid card companies
were sent questionnaires, and 38 responded.60 National totals were constructed using respondent information as well as public information about nonrespondents. Nevertheless, the totals for payments by
prepaid card are not as reliable as the totals for
payments by established types of payments, as the
reported portion of totals for prepaid cards was only
58 percent, by both number and value, compared with
an overall reported portion for established payments
of greater than 99 percent.

Comparison of 2006 and 2007 Estimates
This article reports estimates of the national number
and value of payments in two ways—annualized
March and April 2007 estimates of debits from
accounts at depository institutions (check, ACH, and
debit card payments and ATM withdrawals) and
calendar-year 2006 estimates for check, ACH, debit
card, and credit card payments, electronic benefits
transfers, and ATM withdrawals. The 2007 estimates
of account debits are based only on the 2007 depository institution survey, whereas the 2006 estimates for
checks and ACH payments also use information from
the 2007 electronic payment survey. The 2006 estimates of debit and credit card payments and EBTs are
based solely on the 2007 electronic payment survey.
The 2007 estimates of ATM withdrawals from the
depository institution survey are used for the 2006
estimates.
Estimates of checks paid in 2007 are for commercial checks only (checks reported by depository institutions), whereas estimates of total checks paid in
2006 are the sum of U.S. Treasury checks, U.S. Postal
Service money orders, and commercial checks. The
estimates of commercial checks paid for 2006 are
adjusted versions of the estimates of commercial
checks paid for 2007. The adjustment involved the
use of NACHA data showing rapid changes in the
number of checks converted per month throughout
2006 and early 2007. As a result, the annualized total
number of checks converted in March and April 2007
was an estimated 3.39 billion, compared with 2.61 billion in 2006, a difference of 778 million. The differ60. States were also surveyed about the use of prepaid cards for
state-provided benefit programs, and 37 states provided information.
Payments made with such cards are a subset of total prepaid payments.

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Federal Reserve Bulletin h October 2008

ence in value was $178 billion. These differences
represent a lower bound estimate (because of the
decline in checks) of checks that would have been
counted as paid checks if data had been collected
during 2006. Based on this argument, the 2006 estimates for commercial checks were calculated as the
sums of these differences and the 2007 estimates for
commercial checks paid. Based on the same argument, similar adjustments were made for the 2003
estimates of checks paid.
The 2007 electronic payment survey collected
information on the number and value of network
(interbank) ACH payments. The 2007 depository
institution survey collected information on the number and value of network, on-us, and direct (bilaterally exchanged) ACH payments. Separate proportions
of ACH debits and credits by number estimated from
the depository institution survey, combined with network ACH debit and credit data from the 2007
electronic payment survey, were used to estimate total
on-us ACH payments in 2006. Direct ACH payments
were negligible and were included in the on-us figures. The total number of ACH payments in 2006 was
calculated as the sum of these on-us figures and the
estimates of the number of network ACH payments
from the 2007 electronic payment study.
The 2007 estimates for the total value of ACH
payments are much higher than the estimates for
2006. Some of the large commercial banks that
responded to the depository institution surveys had

difficulty distinguishing ACH payments from largevalue funds transfers called offset entries, inflating the
value of on-us ACH payments by an unknown
amount.61 The 2006 estimates of the value of on-us
ACH payments were calculated based on the assumption that the average value of on-us ACH payments is
equal to the average value of network ACH payments.
Actual on-us ACH value may be somewhere between
the two estimates. These estimates—appropriately
adjusted—were used in conjunction with annual 2006
totals provided by electronic payment networks in the
electronic payment surveys to estimate the 2006
figures.
For estimates of total ACH, data from the 2007
depository institution survey were used to estimate
the fractions of ACH transactions, by number, that
were on-us and cleared in-house (separately for debit
and credit transfers). The estimated fractions were
applied to 2006 network ACH payment estimates
from the electronic payment survey to estimate on-us
ACH payments for 2006. These were added to the
network ACH payments in 2006 to yield estimates for
total ACH.

61. The difficulty in separating offset entries from ACH payments
was due to the use of a shared platform to process both, a common
practice at some of the largest depository institutions. The difficulty,
which involves a small number of very large value entries, did not
substantially affect the estimates of the number of ACH payments.