Whether we’d like to admit it or not, the future of payment processing is changing: what’s trending today could be outdated tomorrow. Not long ago, plastic credit cards were a thing of the future and paper checks were the norm, but that future has come to pass and the digital revolution of payment processing is upon us. Some professionals in the industry argue that credit cards will be replaced by new digital payment methods in the near future, and research suggests that commercial checks of all types may soon become obsolete. When looking at recent trends, they may have a point.
In a recent study the Federal Reserve System (FRS) looked at data from 2015 to 2016 and found that remote credit card payments outpaced in-person card payments by more than 8.7%. Similarly, the study found that remote non-prepaid debit card payments increased during that period almost three times faster than in-person payments. This shows how much more connected to the global economy we are becoming, and how we are looking for payment solutions to match.
In the study, the FRS points out that ACH transfers and credit card payments grew at higher rates in one year than the previous three-year period combined. According to the study, credit card payments grew by $7.6 billion in number and $3.3 trillion in value in just one year. During this period, ACH network credit and debit transfers also grew exponentially, increasing at rates of 5.2% and 5.3% within that one-year period compared to growth rates of 5.0% and 4.8%, respectively, from 2012 to 2015.
As for commercial checks, their fate isn’t looking good. According to the study, recent estimates for 2015 to 2016 show declines of 3.6% by number and 3.7% by value in commercial checks paid by a group of the largest depository institutions. In the study, commercial checks include all types of checks, except for U.S. Treasury checks and postal money orders, which are paid by the Federal Reserve Banks.
The Future of Payment Processing
Looking forward, the number of credit card payments and ACH payments are expected to keep growing. Though remote credit card payments are growing faster than in-person payments, data suggests that the total growth of all credit card payments is expected to continue to increase more and more in the coming years. However, with continued advancements, the material aspect of the credit card may change. At TheStreet’s Investor Boot Camp Conference held earlier this year, PayPal CEO Dan Schulman predicted that soon credit cards won’t even exist, proclaiming, “Twenty years from now, there will be no more credit cards, really…” He predicts by then everyone will have a smartphone, enabling consumers to have “full connectivity at a very low price.” And perhaps he has a point, with P2P payment apps, mobile in-store payment options, NFC payment methods, and digital currencies on the rise, maybe we don’t need a to carry anything other than mobile devices.
Perhaps Schulman’s opinion is a bit skewed, however, after all he is the CEO of PayPal and owns Venmo, which is currently the largest growing P2P payment transfer service next to Zelle and is estimated to grow to $22.9 million by the end of this year, up from $17.3 million just a year earlier. But they aren’t the only P2P services revolutionizing the way we pay and get paid. NACHA released statistics in July indicating that P2P transactions totaled 29.4 million on the ACH network in the second quarter, a 24.1% increase year-over-year, and a 14% rise since the end of 2017. So, while Schulman might be more hopeful than realistic about the demise of credit cards, perhaps it’s a vision we share when we look towards the future. Either way, it’s certainly trending and defining the way we look at ACH payment processing.
What’s Trending Now
credit card payments and ACH money transfers are trending now and aren’t expected
to slow down. Now more than ever, business is personal, so the way people conduct
business is based on personal trends. As technology advances, businesses are
expected to keep up and so people are looking for solutions that are more
convenient and reliable, more cost effective and time-saving, and more secure.
That’s what’s so appealing about B2B and B2C solutions like credit card
processing and ACH money transfers. These allow merchants a quicker, more
secure, and intuitive solution to do business anywhere, anytime. Because let’s
face it, people want to access payment options from wherever, whenever, and
they don’t want to spend an arm and a leg to do it. That’s why it’s so
important for payment processing companies to offer cost effective merchant
solutions so paper and plastic can be left at home.