Federal Reserve Board's study on use of checks. Check 21.

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 checks.
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 to come.
The average value per check, adjusted for inflation, has decreased between 1979 and 2000, from $1584 to $925.
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 organizations.
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 payees (BG2BG).
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 paper check.
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.