Even in this age of electronic commerce, paper transactions still dominate the U.S. payments system. Electronic transfer is growing rapidly, but cash and the paper check remain the workhorses for Americans to make their daily purchases and pay their bills, according to the Federal Reserve Bank of Dallas.
For noncash transactions, the role of the paper check differs between the number and the value of transactions. Either way, however, the check is dominant, accounting for 70 percent of the 94.5 billion noncash payment transactions in 1998 and 82 percent of their $94.5 trillion value.
In terms of dollars spent, the biggest and fastest growing rival for checks is the direct deposit of payroll and direct payment of bills through automated clearinghouses belonging to the Federal Reserve or private associations. In terms of the number of transactions, the competition to checks arises from the growing use of credit and debit cards for small transactions (averaging $60 per purchase in recent years). The transaction share held by the credit card has flattened in recent years, but the debit card has come from nowhere in 1991 to grab 6 percent of transactions in 1998.