LAKE BLUFF, Ill. (10/14/09)--Credit unions will have to plan for members’ greater electronic payment use because the number of checks and electronic transactions for debit cards, credit cards and automatic payments is expected to exceed 100 billion by the end of the year--the first time in U.S. history, according to an Illinois financial industry research firm. “[Based on the data], we believe there will be implications to the bottom line of financial institutions in pricing, fee structure and service delivery,” said Mike Moebs, CEO of Moebs Services, a research firm in Lake Bluff, Ill. The volume represents all transactions from consumers and businesses. It is based on research and projections conducted by Moebs Services, which used Federal Reserve data ranging from 1979 to 2006. Transactions in 2009 are expected to break down as follows:
* Debit card transactions, 33%; * Paper checks, 24%; * Credit card transactions, 23%; and * Automatic payments, 20%.
One interesting item about the projected 100 billion transactions is that “they do not represent an increase in U.S. consumer spending, which began declining in 2008 and is still not back on track as we approach year-end,” Moebs said. “This research indicates that consumers are doing significantly more transactions for significantly fewer dollars than in the past. This may be due to easy electronic payment methods replacing cash,” he added. The changes in payment trends mean that credit unions and other financial institutions will see reduced overdraft revenue from consumers using fewer paper checks. Paper check volume has dropped to 25% of transactions from 85%, Moebs said. Financial institutions also will have to secure their online electronic payment systems to prevent fraud, and ensure that their electronic communications can manage the increasing volume of transactions without errors, Moebs added.