U.S. Households' Access to and Use of Electronic Banking, 1989-2007

Article excerpt

Consumers are increasingly embracing electronic technology as a means of making payments and managing their personal finances. Data from the 2007 Federal Reserve Payments Study show a continuing shift away from paper-based transactions, such as payments by cash and check, and toward electronic transactions, in particular, automated deposits and payments and payments by debit card. (1) The number of debit card payments, for example, increased from 15.6 billion to 25.3 billion between 2003 and 2006, and the dollar value of debit card payments increased as well (see box "How Would You Like to Pay for That?"). (Payments by credit card, as a proportion of all payments, remained constant over the period.)

Managing their financial matters electronically offers consumers many potential benefits: they can, for example, arrange for timely payments at virtually any time of the day or night and can avoid overdrafts by reviewing their account balances throughout the month. Yet concern remains that some technologies are not available to consumers at all income levels. (2) There is also concern that data breaches in recent years have reduced consumers' willingness to use some technologies. (3)

This article examines changes over time in consumers' access to, adoption of, and attitudes toward various forms of electronic banking (e-banking), including the use of automated teller machines (ATMs), debit cards, direct deposit, preauthorized payments, phone banking, online banking, smart cards, and prepaid cards. The article also updates data on electronic banking reported earlier and looks at several emerging technologies. (4) The analyses are based on data from two sources: the Federal Reserve's triennial Survey of Consumer Finances (SCF) (surveys for 1989 through 2007) and questions included by the Federal Reserve in the University of Michigan Survey Research Center's Surveys of Consumers (surveys in 1999, 2003, and 2006). The two surveys are described in appendix A. Unless stated otherwise, all analyses were restricted to households that reported having an account with a bank, thrift institution, or credit union.


As the financial services industry has evolved, consumer access to financial services has increased, both in the number of brick-and-mortar bank branches and in the availability of e-banking services, such as ATMs and online banking. Despite a decline of almost 50 percent in the number of banks between 1980 and 2007 due to industry consolidation, the number of bank branches has climbed steadily, at a compound annual rate of growth of 2.7 percent. (5) Growth in the number of ATMs has been even more rapid, with a compound annual growth rate of 12.2 percent (figure 1). In particular, the growth of off-premises ATMs (ATMs not located within a bank branch) has allowed consumers greater access to their accounts.


Growth in the number of bank branches and ATMs narrows the distance between consumers and their financial services providers. In the 1989 Survey of Consumer Finances, 36 percent of respondents reported living or working within one mile of the nearest branch or ATM of their primary financial institution; by 2007, the proportion had grown to 41 percent (and 86 percent lived or worked within five miles) (table 1).

Consumers' Banking Tendencies

The ubiquity of bank branches means that most consumers have convenient access to traditional banking channels, such as brick-and-mortar branches and ATMs. And the use of direct deposit and preauthorized payments, together with the availability of financial services via telephone and computer, means that consumers can initiate most transactions 24 hours a day, from remote locations.

As the adoption of e-banking grows, one might expect brick-and-mortar branches to lose importance. However, surveys continue to show that the majority of consumers still conduct their bank business mainly in person (table 2). …