Technology is rapidly transforming the banking industry — and expanding its ability to reach the unbanked. Employers are turning increasingly to electronic payroll cards as a cost-effective way to reduce the burden of writing and processing checks. Consumers are using their payroll cards and other versions of prepaid debit cards — also known as stored value cards — as a substitute for cash and checking accounts.
Monitoring this trend, the American Bankers Association reported last December that in 2003, for the first time, electronic payments surpassed cash and checks as consumers’ preferred payment method for in-store purchases — an “evolution of payment behavior,” the ABA noted, “driven by the increasing popularity of debit cards.”
Debit cards accounted for nearly a third (31 percent) of in-store purchases in 2003, up from 21 percent only four years ago. Reliance on credit cards held steady during that time, at about 21 percent. Cash and checks, which accounted for 57 percent of in-store purchases in 1999, dropped to about 47 percent last year.