E-Payments Increasing for Consumers, Businesses

More businesses are turning to electronic payments as a way to save money and manage cash flow more efficiently.

Businesses are offering direct deposit to their employees, making payments to vendors electronically and accepting electronic payments through their websites or through monthly debits to checking accounts. As a result, firms are making and receiving payments more quickly while lowering their processing costs.

In addition, an account history and activity record are readily available, said Jeff Rayis, first vice president, Columbus (Ohio) market manager for the treasury and securities services group at JP Morgan Chase, in an interview with Business First newspaper.

Automated payments grew to 12 billion payments in 2004. That's a 20 percent increase from the year before, when 10.02 billion payments were reported, according to the Electronic Payments Association based in Herndon, Va. Electronic payments are estimated to grow to more than 55 billion in 2005.

Direct deposit alone could save a company over $2 per paycheck, Rayis said. Some estimates put the cost of a processing a paycheck at $2.98, compared to a cost of roughly 51 cents per automated transaction.

The growing use of payment cards, meanwhile, is helping to boost e-payments, according to Visa, which recently conducted a survey of 459 firms that cited receiving and managing cash as a major issue. All survey respondents said they want more efficiency, especially when receiving and collecting payments, and 42 percent want to lessen administrative work.

The company said that nearly half of respondents said they would increase electronic payments if all their vendors and suppliers accepted e-payments.

While electronic payments are increasing, the personal check is still popular among many consumers and business. Justin Bachman, in a column for the Associated Press, writes that according to Federal Reserve research, Americans use more than 36 billion checks a year, with consumers accounting for just over half the total. Older Americans, in particular, are comfortable with paper checks and are not interested in switching.

Still, with the huge growth in debit cards, online bill payments and electronic fund transfers, writing checks decreased 4 percent between 2000 and 2003, which was the first time more electronic payments were made than payments by paper check, according to Dove Consulting Group Inc. of Boston, which conducted the study of payment strategies for the Fed.

"Think of this: The Internet is still a new medium from the last 10 to 15 years ... and even debit cards were just getting off the ground in the early '90s," said Joel Stanton, a Dove consultant who worked on the 2004 Fed study. "It's a long time away, but I can see where the days of the check are coming to a close."

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