By Patti Murphy
ProScribes Inc.
Blame, or credit, the pandemic. Or maybe it's a sign of the coming of age of Gen Z, the only generation born into the digital age. Whatever the reason, noncash payments in the United States are growing at a rapid clip.
The Federal Reserve reported that in 2021, Americans made 204.5 billion ACH, card and check payments with a combined value of $128.51 trillion. That represents a 9.5 percent increase in value each year since 2018, when we made 173.7 billion payments valued at $98 trillion. And it's three times the rate of increase in total electronic payments values registered between 2000 and 2018, the Fed said.
Every three years, the Federal Reserve undertakes the monumental task of assessing the use of various types of payments. The Federal Reserve Payments Study is a collaborative effort of the Federal Reserve Board and the Atlanta Federal Reserve Bank. It has developed aggregate estimates, every three years since 2001, using data collected from financial institutions, the card networks and major processors.
So massive is the data collection effort, that it has always taken multiple years of parsing data to develop these estimates. In fact, the Fed explained in a press release that it was only reporting "initial findings" of the study now and that, "Additional details will be available as analysis is completed."
Given my tenure in the payments space, it shouldn't surprise anybody that I have been following this data quest from the get go. I consider this Fed study to be the most comprehensive and reliable source of information on retail payment trends. Hands down.
For those readers who don't necessarily like reading through a lot of numbers, here are the topline results reported by the Fed:
I've always been a big fan of checks, but even I have to admit that checks just don't cut it for most Americans anymore. Myself included. I haven't written a single personal check yet this year, and I only wrote two last year.
My business is a different matter, where I've written eight or 10 checks this year, mostly paychecks. I tend to think the lion's share of checks in the United States are being written by businesses. Back in 2018, the Fed reported that 60 percent of checks, by volume, were written by businesses and government agencies.
The annual total number of checks written fell from 15.5 billion to 11.2 billion between 2018 and 2021. The total value of checks written increased by $460 billion to total $27.23 trillion. The average check in 2021 was for $2,430.
Between 2018 and 2021, the combined annual growth rate (CAGR) for checks was minus 2.8 percent, the Fed said; the CAGR for the value of checks written was 0.46 percent. Even checks that get converted to ACH payments (at the POS, for example) are on the wane. There were 800 billion worth a combined value of $240 billion in 2021, representing a three-year CAGR of minus 19.2 percent in volume and minus 15.8 percent in value.
The ACH was created as an electronic alternative to checks in the 1970s, but it took until 2009 for ACH payments to surpass check usage and become the highest value form of noncash payment method used by Americans.
In 2021, the ACH network carried 36.2 billion payments worth a total value of $91.85 trillion. The average ACH payment was $2,536. By comparison, there were 28.5 billion ACH payments in 2018, worth a combined $64.16 trillion. So, the three-year CAGRs for ACH payments were 8.3 percent (volume) and 12.7 percent (value).
ACH debits (for example, transactions for phone and internet purchases) outpaced credits (like direct deposit)—20.3 billion compared to 15.9 billion—in 2021. But the total value of credit transfers ($58.66 trillion) far exceeded that of debits ($33.19 trillion).
At some point, I expect FedNow, the Fed's real-time payment network, to start throwing shade on the ACH. The use cases for real-time payments are many and include time-sensitive applications that the ACH simply can't process fast enough. Think in terms of payroll applications like earned wage access and payments to gig workers; POS payments; consumer bill payments; and business supplier payments, refunds and adjustments.
Despite a temporary drop in 2020, the number of credit, debit, EBT and prepaid card payments registered a CAGR of 6.2 percent from 2018 to 2021, to total 157 billion. Monies spent with cards totaled $9.43 trillion, registering a 10 percent CAGR for those three years.
"The increase in the number of card payments accounted for more than 84 percent of the growth in the number of noncash payments from 2018 to 2021," the Fed wrote.
Prepaid cards saw a big uptick in usage—a three-year CAGR of 9.6 percent by number (to total 18.1 billion in 2021) and 20.6 percent by value ($610 billion). But as the numbers suggest, the average prepaid card transaction was just $34.
Payments using traditional debit cards (payroll cards, those linked to checking accounts) grew fast, too, at a CAGR of 6.5 percent in volume and 12.7 percent in value. In all, the Fed counted 87.8 billion debit card payments valued at $3.94 trillion in 2021.
Credit cards were the second fastest growing card payment type used, rising to 51.1 billion in 2021, from 44.7 billion three years earlier. The total value of general-purpose credit card transactions in 2021 was $4.52 trillion, compared to $3.64 trillion three years earlier.
Private-label credit cards were used for 3.3 billion payments totaling $360 billion in 2021. That's down from 3.8 billion payments in 2018, but up slightly from $340 billion in total value.
Finally, ATM card usage is down, dropping 10 percent in the number of transactions to total 3.7 billion valued at $730 billion. But the average ATM cash withdrawal grew to $198 in 2021 from $156 in 2018. 
Patti Murphy is senior editor at The Green Sheet and self-described payments maven of the fourth estate. She also co-hosts the Merchant Sales Podcast.
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