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with consumers and small merchants. In January, Square
The noncash payments pie Inc. heralded an arrangement with Apple Inc. to offer mer-
chants discounted contactless card readers and $350 in
The Federal Reserve Board conducts surveys every three years processing credits for Apple Pay transactions.
to assess the size and value of the noncash payments pie. Data
covering 2015 was published in late 2016. Here's a snapshot of that "Square plans to most heavily market the promotion at
most recent data. counter-top merchants, like small retailers, rather than in-
• Americans made 33.8 billion credit card payments dividual sellers," stated a Feb. 1, 2017, report by BI Intelli-
with a combined value of $3.16 trillion – an increase gence. BI Intelligence analysis suggests the move is part of
of 6.9 billion card payments and $610 billion in value a strategy to generate profits from hardware sales, which
since 2012. This works out to an annual growth rate of generated about $29 million in red ink on Square's balance
8 percent by number and 7.4 percent in value between sheet in 2015 and the first half of 2016.
2012 and 2015. Banks push P2P in near real time
• Debit card payments (including prepaid debit) totaled
69.5 billion with a value of $2.56 trillion. Debit card Not to be overtaken by nonbank competitors, several large
payments grew at an annual rate of 7.1 percent by banks and bank technology firms are joining forces to
number and 6.8 percent by value between 2012 and create alternative P2P networks. Last year, a consortium
2015. that includes the largest banks in the country announced
• Americans made 17.3 billion check payments worth Zelle, a P2P network that is set to go live in the first half of
a total of $26.83 trillion. Check payments fell at an 2017. Zelle is the creation of Early Warning Services LLC,
annual rate of 4.4 percent by number and $380 billion which is owned by several major U.S. banks.
by value from 2012 to 2015.
Once Zelle is operational, consumers will be able to send
• ACH payments totaled 23.5 billion with a combined payments to each other using email addresses or mobile
value of $145.3 trillion. The total of ACH payments phone numbers, with same-day funds posted to recipi-
grew at an annual rate of 4.9 percent by number and ents' checking accounts, although funds availability won't
4.0 percent by value between 2012 and 2015. necessarily be immediate.

To put this data into perspective, consider that a 2016 survey by "Security concerns, interoperability problems and delays
Accenture revealed that 60 percent of North American consumers in funds availability have been persistent challenges to
use cash at least once a week for POS transactions. awareness, adoption and usage for non-FI P2P services,"
noted Talie Baker, an Analyst at Aite Group LLC. "The
launch of Zelle gives banks a chance to establish a foot-
veyed, 32 percent of those identified as millennials and 27 hold as the provider of choice for person-to-person pay-
percent of mass affluents (households with income pro- ments, and even take back their share of the market from
ducing assets between $250,000 and $1 million, excluding non-FI providers."
real estate) use their mobiles for P2P payments, compared
with 18 percent of the total. According to Early Warning, any financial institution can
join Zelle. Seventeen financial institutions had signed on
The largest obstacle to greater adoption, the consultancy to be part of Zelle as of October 2016; since then, several
said, is the merchant checkout. "The reality is that mer- additional banks and leading bank technology companies
chants have been slow to invest in modern card readers. have added their names to the member roster.
Even if people want to pay by smartphone, they often can-
not," the report stated. It encouraged payment companies Larry McClanahan, Director of Digital Delivery at Fifth
and merchants to build "the case for change with incen- Third Bank said the decision to join Zelle was a response
tives that unlock inertia." to consumer demand. "We looked at what our customers
want," he said. "They want to make payments now; they
Deloitte reported that more than 20 applications in the U.S. don't want to wait for them to process. They want it to be
marketplace allow consumers to initiate payments from easy. And they want the same trust they have in their own
their debit cards or bank accounts using smartphones. bank."
Forrester Research Inc. projected P2P payments will top
$17 billion in 2019, up from $5 billion in 2014. Michael Abbott, Managing Director for Digital Financial
Services at Accenture, believes consumers want more than
Today, PayPal is one of the best-known P2P payment pro- just faster payments. "[T]he incentives are not there yet,"
viders. In addition to online payments, PayPal offers P2P he said. He likened current offerings to early computer
mobile payments via its Venmo unit. Other nonbank op- games. "Payments providers need to bring the traditional
tions like Apple Pay and Android Pay are making inroads card to life and create a real-time interactive experience
for consumers," he added.

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