The use of checks and other noncash payment instruments in the United States - Statistical Data Included

Federal Reserve Bulletin, August, 2002 by Geoffrey R. Gerdes, Jack K. Walton, II, Thomas Guerin, Amin Rokni

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The number of noncash payments per capita is higher in the United States than in the other economies mainly because of the more extensive use of checks. Given the very low level of noncash payments per capita in some countries, it seems likely that cash is used more extensively in these countries than in the United States. (20) If that is true, measures of the importance of checks as a share of noncash payments may overstate the relative use of paper-based payment instruments in the United States. Without reliable measures of cash use, however, a comprehensive comparison across countries of the extent to which electronic payments have replaced paper-based payments (mostly cash and checks) is not possible.

SUMMARY AND CONCLUSIONS

Statistical estimates indicate that the number of checks paid in the United States rose from 32.8 billion in 1979 to 49.5 billion in 1995 but declined to 42.5 billion in 2000. These three estimates are highly suggestive, though not conclusive, evidence that the total number of checks paid per year peaked in the 1990s. Despite the apparent decline since 1995, the number of checks paid remained higher in 2000 than in 1979.

The estimated value of checks paid declined from $50.7 trillion in 1979 to $39.3 trillion in 2000, suggesting that electronic payments have increasingly replaced larger-value checks. Moreover, although the real value of transaction deposits declined slightly from 1979 to 2000, the decline was not as great as the decline in the value of checks paid, a further suggestion that electronic payments originated from transaction deposits likely replaced check payments.

The number and value of checks paid vary among institutions in interesting ways. The average value of checks paid, as well as the intensity of check use, differs by type and size of institution, reflecting in part the types of customers served. Differences also exist according to geographic region. Generally, the per capita value of checks paid is highest in the Northeast, and the number of checks paid per capita is highest in the Midwest. In addition, the number of checks paid per capita apparently is greater in rural areas than in urban areas.

Although the number and value of checks may have begun to decline, it appears likely that checks will continue to play a significant role in the U.S. payment system, particularly when electronic payments are not well suited for meeting consumer or business needs. U.S. authorities have generally relied on market forces to provide new payment products and services. In this environment, the fact that checks are still widely used suggests either that checks are an efficient means of payment for many purposes relative to alternatives or that barriers to innovation are inhibiting the development of alternatives. The Federal Reserve has emphasized the need for the public and private sectors to identify any such barriers and to work to reduce or eliminate them when doing so is in the public interest.

APPENDIX: DATA SOURCES AND METHODS OF ESTIMATION