Evolving payments

Payment trends are tracked, analyzed, scrutinized and hypothesized over and over.  We have always paid attention to payments and how they are processed, completed, etc.  But, never as much as over the last two decades. This is mainly due to the rapid number of changes and advancements made in the payments space.  

Consider that before the mid-1950’s, the only way to make a payment in the United States was via cash/coin or personal check.  Then, in 1950 the first credit card was introduced in the U.S. Nearly twenty years later ACH standardized the process of automated credit and debits. Paving the way for direct deposit and automatic withdrawal.  In 1969 the first domestic ATM was introduced in New York. And debit cards were introduced shortly after, in the early 1970s.  

Why were all of these new payment methods created? Convenience and speed.  The ability to write a check meant not having to carry too much cash around and reduced the amount of cash and coin retailers needed to keep on hand.  The creation of the ATM gave account owners the ability to access cash at times when their financial institution’s offices were closed. ACH meant not having to spend time taking a paper check to your financial institution to make a deposit, only for it to be truly available in your account five to seven days later.  

In the time since the 1970s we watched and analyzed the decline in check payments as debit card payments continued a steady rise.  And for about thirty years we held the course. Nothing changed. Sure, checks got prettier. You could get Snoopy or the American Flag printed on your checks instead of the old parchment paper look.  But, not much changed.  

In 2003, the U.S. Congress enacted the Check 21 Act.  This allowed for a digital copy or printed copy of a check to be used as a legal substitute to speed up check payment processing.  At this time PayPal was coming into its own and beginning its significant growth in the online retail payment market. Then in 2007, the first iPhone was introduced.  

Since 2007, thousands of different payment companies have been created to capitalize on the burgeoning mobile payment marketplace.  

In 2018, debit card payments edged out cash payments for the lead in U.S. payment types.  Why debit? Well, most of your mobile payment apps are using your debit card or checking account information for payment processing.  So, debit cards and ACH are benefitting from the mobile payment space as much as the mobile providers are themselves.  

What’s next for payments?  You won’t have to wait long to find out.  In the time it took to read this article, three new payment start-ups were created in hopes of starting a new trend.  Blockchain has the potential for disrupting the established networks of ACH and debit payment. But, how will that ultimately affect your institution?  Or more importantly, how will that affect your ability to serve your account holders? I guess only time will tell. But, based on the last fifteen years of advancement in payments, you may not want to blink. 

Joe Woods

Joe Woods

Joe Woods, CUDE is a 15-year credit union veteran.  He has spent time with Corporate One FCU, Liberty Enterprises, co-founded Legacy Member Services and was part of the senior management ... Web: www.dolphindebit.com Details