Financial Update (January-March 1999)


Cover Story

Default-Risky Securities

ACH Survey

New ACH Trends

Direct Payment

Board of Directors Announcements


Did You Know?

Data Bank

The Docket

Perceptions of Direct Payment

T he national market research study conducted by the Federal Reserve revealed some of the public's perceptions about direct payments, which allow consumers to authorize companies and financial institutions to electronically withdraw payment amounts (constant or variable) from their accounts on predetermined dates.

  • Direct payment appears to be a confusing term. Many respondents thought the terms automatic withdrawal or authorized automatic payment more accurately describe electronic debit transactions.
  • Many consumers do not understand how direct payment works — 22 percent of users and 45 percent of nonusers indicated they do not understand direct payment well enough to describe it to a friend or colleague.
  • More than one-third of U.S. households claim they use direct payment for one or more recurring payments. On average, direct payment users make 2.4 electronic payments a month.
  • Approximately 84 percent of direct payment users are extremely or very satisfied with the service, whereas 97 percent of direct deposit users are extremely or very satisfied.
  • Ease and convenience are the best attributes of direct payment, according to 75 percent of users. Other benefits are saving time by not having to write checks and not having to worry about paying bills by their due date.
  • Only 13 percent of businesses offer direct payment to consumers. Businesses offer direct payment mainly because customers request it and to improve customer service. Satisfaction with current methods of receiving payments as well as lack of demand are primary reasons for not offering it.
  • Businesses that offer direct payment rely on signing up new customers when they open new accounts instead of targeting existing customers.
  • Surveyed businesses said direct payment improves cash flow and saves time and money because of decreased check processing. They also cited improved reliability as a benefit because payments arrive at the same time each month, reducing late and delinquent payments.
  • Only 47 percent of businesses use direct payment for their own bills. Greater potential exists if a discount from the bill is offered.
  • Businesses and consumers depend primarily on their financial institutions for information about direct payment and direct deposit.

More information about the Automated Clearinghouse study can be found on the St. Louis Fed's web site at