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Federal Reserve Payment Study: Checks remain a critical component of the payment system

Americans may be using checks less often these days, but with 21.1 billion written in 2012, checks remain a critical component of the payment system. Checks also are significantly less prone to fraud than other methods of payment, according to the 2013 Federal Reserve Payment Study. One reason for this may be image exchange and RDC, as the Fed said nearly all checks are now cleared electronically.

Excluding wire transfers, Americans made an estimated 122.8 billion noncash payments with a total value of $79.0 trillion in 2012, according to the Fed’s data. Broken out into two separate categories (electronic and paper), checks represented fully one-third of the total value of non-cash payments but just 15% of the total number of payments. And with an average value of $1,420, checks are used for much larger transactions than the average credit card payment, which was $92, in 2012.

The Federal Reserve Payments Study is spearheaded by the Federal Reserve Bank of Atlanta. The Atlanta Fed (which manages Federal Reserve Retail Payment Operations) has been collecting and analyzing data on non-cash payments every three years since 2000; the 2013 study is the fifth thus far. The study consists of three different surveys that collect data from financial institutions, networks, processors and card issuers.

The complete 2013 Federal Reserve Payments Study report, released in late July offers keen insights into the nature of check writing in America. For example, the Fed’s analysis indicates that businesses continue to rely on checks more than individuals. Checks written by business accounted for 78.5% of the total value of checks paid in 2012 while checks payable to businesses were 82.7% of that total.

Additionally, the research indicates there were an estimated 31.1 million unauthorized transactions with a total value of $6.1 billion, in 2012. Checks were just 3% of the total number and 16% of the total value of those third-party frauds.