U.S. Consumers and Electronic Banking, 1995-2003

Article excerpt

The variety of electronic banking technologies available in the marketplace has greatly expanded in recent years. For financial institutions, such technologies as direct deposit, automated teller machines, and debit cards can speed processing and reduce costs. Other products and services, for example, computer banking and stored-value payroll cards, are viewed as ways to retain existing customers and attract unbanked and underbanked consumers. From the consumer's perspective, choosing to use electronic banking (e-banking) technologies can mean easier and lower-cost bill-paying, around-the-clock availability of financial services, and time savings in managing finances. For some consumers, e-banking may not be a matter of choice, as more and more financial transactions are being conducted in an "electronic only" format.

Research suggests that consumer acceptance and use of e-banking technologies are related to the characteristics of both the individual consumer and the specific technology. For example, acceptance appears to be associated with a consumer's socioeconomic and demographic characteristics (such as income and age), perceptions of specific technologies (such as perceived ease of use), and personal preferences (such as desire for control over when a bill is paid).

This article draws on data from two nationwide surveys--the Board's Survey of Consumer Finances and the University of Michigan Survey Research Center's Surveys of Consumers--to look at consumer use of e-banking technologies, particularly as it relates to consumer demographic characteristics and perceptions, and the relationship between these factors and the characteristics of selected e-banking products and services. By combining data from these two periodic surveys, the article examines changes in consumers' use of e-banking technologies between 1995 and 2003, a period of substantial change and growth in the electronic financial services marketplace, and shifts in perceptions in recent years. (For information on the two data sets, see appendix A.) The article concludes with a discussion of the implications of trends in the use of e-banking for consumer educators.


Electronic banking encompasses a broad range of established and emerging technologies. Some are front end" products and services that consumers opt for, such as ATM cards and computer banking; others are "back end" technologies used by financial institutions, merchants, and other service providers to process transactions, such as electronic check conversion. Some are tied to a consumer bank account; others are unrelated to a bank account but instead store monetary value in a database or directly on a card. (1) As the e-banking marketplace has evolved, the distinctions between products have blurred; for example, one plastic card having a magnetic strip may be tied to a bank account and another may store monetary value, but both may be referred to by merchants and vendors as "debit cards." Described here are the most common products and services used by consumers (other electronic banking technologies and related terms are described in the box "Glossary of E-Banking Terms").

Products Related to Bank Accounts

According to the 2001 Survey of Consumer Finances (SCF), about nine out of ten U.S. households have a bank account, and nearly all households within that group (93 percent) have at least one electronic fund transfer feature--direct deposit, an ATM or debit card, or computer banking, for example--associated with their account.

Direct deposit. Nearly two-thirds of all employees in the United States have their pay deposited directly into a bank account. (2) And more than four-fifths of social security recipients have benefits deposited directly into their account, thanks in part to the U.S. Department of the Treasury's EFT '99 initiative to increase the number of federal payments made electronically. (3) A part of that initiative was development of the all-electronic Electronic Transfer Account (ETA), a consumer bank account that allows federal benefit recipients to access their funds via ATMs and at point-of-sale terminals. …