New Fed data points to soaring card payments

Americans continue to ring up a growing share of purchases using credit and debit cards. New data published by the Federal Reserve reveals that growth in credit and debit card payments is outpacing growth in all other forms of noncash payments.

U.S. shoppers made 174.2 billion noncash payments in 2018, an increase of 30.6 billion (or nearly 4.7 percent) over 2015, according to the 2019 Federal Reserve Payments Study. The combined value of “core” noncash payments (credit and debit cards, ACH and check payments) totaled $97.04 trillion, an increase of $10.25 trillion (or 8.47 percent) over 2015, the Fed said.

The Fed collects data on noncash payments through ongoing research projects, and publishes a comprehensive report every three years of its findings. The latest report, detailing noncash payment trends between 2015 and 2018, was published in late December.

Debit numbers soar, along with ecomm payments

The Fed’s latest batch of data points to significant growth in both credit and debit card usage. Combined, credit and debit card transactions grew at a rate of 8.9 percent a year between 2015 and 2018, up from a yearly gain of 6.8 percent a year over the previous three-year span. Debit cards (both traditional and prepaid) were used by Americans almost twice as often as credit cards in 2018. But the value of credit card payments exceeded the value of debit card payments by almost 30 percent, the Fed reported.

By total, credit and debit card payments made up the largest piece of the 2018 noncash payments pie at 75.3 percent, but they represented just 7.3 percent of the total value of noncash payments in 2018. The value of card-not-present transactions reached $3.29 trillion in 2018, nearly equal to the value of card-present transactions “driven in part by growing ecommerce card payments and the use of cards for recurring bill payments,” the Fed wrote.

And when it comes to card-present transactions, chip authentication now dominates. More than half all card payments in 2018 involved chip authentication, compared to just two percent in 2015, the Fed noted.

Americans used their debit cards for 5.1 billion ATM cash withdrawals, a slight decline (100 million) from 2015, although the average amount withdrawn rose to $156 in 2018 from $146 in 2015.

ACH debits surpass checks

ACH transactions grew 6.0 percent per year between 2015 and 2018, while the value of those transactions increased 7.2 percent a year. Check usage, meanwhile, continued to fall, at a rate of 7.2 percent a year between 2015 and 2018. The value of checks written also fell, by about 4 percent a year, the Fed said.

But the big news here is that total ACH debit transactions exceeded the total number of checks written for the first time in 2018.

With an ACH debit, a consumer (typically) authorizes a business to initiate a debit from their bank account to that business’s bank account. As such, it is the ACH transaction type that most closely mirrors checks. ACH debits are popular for consumer bill payments, but also can be used for one-time purchases. Under an ACH credit scenario, the consumer initiates the transaction, instructing their bank to push funds to another individual’s or business’s bank account.

In all, the ACH was used to process 16.6 billion payments in 2018; the Fed said there were just 14.5 check payments made in 2018. This represents a significant turnaround from 2000, when there were just 2.1 billion ACH debit payments compared to 42.6 billion check payments.

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