E-Payments Help Push Fed Check Volume Down Nearly 6%

The volume of checks processed by the Federal Reserve dove nearly 6% in the first quarter, reflecting the impact of various electronic payment methods on the nation's usage of paper checks. According to the latest data released by the Fed, the number of checks it cleared in the first quarter plunged 5.8% to 3.64 billion, the second biggest quarterly drop in the past 15 years. The Fed is now processing the smallest volume of checks recorded since 1989. The volume for the first quarter is down fully 1.23 billion checks, or 25%, from the peak quarter during that span, the fourth quarter of 1992. The number of checks processed per business day is now 59 million, according to the Fed, down from 62 million in the fourth quarter of 2003 and down from 77 million in that peak quarter of 1992. The decline in the first quarter was the third consecutive quarterly drop at the Fed, and the sixth in the last nine quarters. Only an 11.2% decrease in the first quarter of 1994 was larger than the first quarter decrease in Fed volume. The Fed data since 1989 shows that the decline in check volume has not been uniform. There were 10 consecutive quarters, from early 1995 through mid-1997, when check volume fell below 4 billion. Volume then exceeded 4 billion per quarter until the third quarter of 2003. The average value per check, however, is now $953, according to the Fed numbers, hundreds of dollars higher than was the case 15 years ago. Most observers attribute the decline in paper checks to the increasing usage of electronic payments ranging from credit and debit cards to electronic check conversion through the automated clearing house. Debit card transactions secured by signatures and personal identification numbers, for example, grew nearly 20% last year, while electronic checks through the ACH ballooned 154% (Digital Transactions News, March 22). The dropoff in check volume is also leading banks and non-bank processors to create image-exchange networks in which digital images of checks, rather than paper, can be transmitted for settlement.