Use of checks - FRB study
The Federal Reserve Board conducted a study
on the use of checks in this country. What follows are excerpts
from the final report. Visit the Federal
Reserve website for more information.
- In the year 2000, over 42 billion checks
were written, valued at $39.3 trillion. Check volume on the
whole has increased by 30% since the 1979 estimate of 32.8 billion
- Check writing in the United States is steadily
giving way to electronic forms of payment. Although checks remain
the dominant form of non-cash payment, over the last 20 years,
their proportion of the total payments market has declined considerably.
- Given the large number of checks still being
written in the United States and the increased usage of electronic
forms of payment, businesses and financial institutions are
going to have to maintain multiple channels for the foreseeable
future. While checks will account for a decreasing portion of
total payments, they will continue to be around for some time
- The average value per check, adjusted for
inflation, has decreased between 1979 and 2000, from $1584 to
- Twenty-nine percent of all checks are "on-us,"
meaning the bank of first deposit for these items is also the
institution on which the checks are drawn. "On-us" checks
represent a greater proportion of check value than of check
volume. 36% of total US check value, equivalent to $14.3 trillion,
are 'on-us' checks.
- 251 million of the 42.5 billion checks written
annually are returned. (.6% of total check volume). The average
value per returned check is $701, which is $224 less than the
average value of all check payments.
- Consumers write over half of all checks,
while businesses receive about half of all checks. Consumer-written
checks account for only 19% of the total value of check payments.
Businesses write checks for 62% of total check value. Businesses
are both the heaviest writers and receivers of check payments.
- Business-to-business checks account for over
40% of the total value of check payments.
- Point of sale (POS) checks, while a significant
portion of total value (19%), make up only 9% in terms of the
total value of checks.
- The largest segments of check payments are
business and/or government income payments to consumers (17.8%,
e.g., social security checks) and consumer remittance payments
to business and/or governments (17.7%, e.g., utility bill payment).
- Of the 21.6 billion checks written by consumers,
22% are for casual payments.
- About half (48%) of the estimated 15.8 billion
checks written by businesses or government organization are
income payments to consumers. Remittance and POS payments make
up the other half of checks written by businesses to government
- Nearly half (49%) of the value of checks
payments is concentrated into a single counterparty relationship,
payments from business or government payers to business or government
- During the year 2000, 29.5 billion electronic
payments were originated in the United States, with a value
of $7.3 trillion. The majority (51%) of electronic payment transactions
were made using credit cards, but 78% of payment dollars were
handled though the ACH.
- While most of the nation's check writers
pay little attention to MICR detail, the nation's banks rely
heavily on the magnetic ink data found on the bottom of checks.
It is MICR data that allows banks to sort, credit, and pay billions
to checks written annually by businesses and consumers.
- The Federal Reserve will adopt a single standard
for MICR (Magnetic Ink Character Recognition) detail transmission
by mid-2005. A single, standard MICR data format comes into
play as the Fed addresses meaningful ways to reduce the cost
and complexity of the nation's paper-based payments system.
The Fed presently supports around 70 different MICR formats
across 45 processing sites.
- Transmitting MICR detail electronically allows
banks and other processors including the Fed, to move essential
check information more efficiently without having to move the
- The Federal Reserve is the largest single,
nationwide processor of checks. In 2000, the Fed processed nearly
16 billion checks.
- The cost of check fraud runs between $10B
and $20B annually.
This information is excerpted from the Federal
Reserve Board's "Retail Payments Research Project: A Snapshot
of the US Payments Landscape, 2002." Information about check
fraud is taken from the FDIC's brochure on the subject.
Contact us for more information.