TowerGroup: Noncash Person-to-Person Market Reaches $1.1 Trillion in 2008, Driven by Check Payments

Analyst Urges Financial Institutions to Leverage Existing Tools to Convert Declining Check Volume to Electronic Payments

Highlights from Report:

• TowerGroup estimates the gross dollar volume (GDV) of the US noncash
  person-to-person (P2P) market in 2008 was $1.1 trillion, composed of
  over 3 billion transactions.
• 
  In 2008, checks represented over $1.013 trillion of the noncash P2P
  payments in the United States and cost financial institutions what
  TowerGroup estimates to be $255 million to process.
• 
  TowerGroup classifies P2P payments into five categories: repayment,
  account-to-account (A2A), family support, informal purchases, and
  informal services.
• 
  Spurred by the continued consolidation of financial service
  institutions (FSIs) and the establishment of new bank holding
  companies, A2A transfer volume will reach a projected $127 billion in
  2012, TowerGroup believes.
• 
  The P2P solutions available to financial institutions range from
  cobranding partnerships to private-labeled third-party solutions across
  multiple delivery channels and payment networks.
• 
  Financial institutions have the tools available to successfully target
  the P2P market and convert existing check volume to electronic
  alternatives.
  
  Editor's Note:  HomeATM is the "only" company in the world that can facilitate 3DES DUKPT Secure P2P payments in "real-time" at a fraction of the cost of methodologies currently being utilized.
  

NEEDHAM, Mass.--(BUSINESS WIRE)--New research from TowerGroup finds that the gross dollar volume (GDV) of the U.S. noncash person-to-person (P2P) market in 2008 was $1.1 trillion. Checks are in decline, but they remain the most significant payment method, amounting to over $1 trillion of the noncash P2P payments volume.

Defined by TowerGroup as a consumer-initiated transfer of funds to another consumer using multiple channels and payment methods, P2P payment methods1 have evolved over the past few years with the advent of the Internet and mobile devices. These payment channels are continuing to grow, as financial institutions look to offer alternative new methods to transfer payments using online fund-transfer modules and mobile platforms. P2P is becoming an essential ingredient for financial institutions as they look to attract a new audience that is interested in on-the-go solutions that are lower in processing cost and greater in functionality.

Despite the availability of these new payment methods, consumers continue to use checks, which represent a net loss to banks on an item basis. TowerGroup estimates that P2P check volume is declining at 10 percent year to year. More important, it is costing an estimated $255 million to process these transactions.

“Banks are losing money hand over fist as they absorb the processing costs associated with every check transaction,” said Jennifer Roth, research director in the Global Payments service at TowerGroup. “The advent of the Internet and mobile devices are driving financial institutions to innovate and adopt new, more cost-effective and convenient means for their customers to transfer and process payments. However, in order to garner additional P2P market share and convert checks to electronic alternatives, financial institutions must create simple, low-cost, and convenient alternatives with flexible funds accessibility.”

TowerGroup expects 2009 to be a crucial year for financial institutions to incorporate P2P solutions so as to retain customers and acquire new ones. To keep a competitive edge, institutions must expand the reach of their business beyond a branch footprint using solutions and options available today. These options range from cobranding partnerships with alternative payment delivery providers such as PayPal and Obopay to private-labeled third-party solutions across multiple delivery channels and payment networks.

Additional highlights of the research include:

• Over 3 billion P2P transactions occurred in 2008.
• In 2008, checks represented over $1.013 trillion of the noncash P2P payments in the United States and cost financial institutions what TowerGroup estimates as $255 million to process.
• Spurred by the continued consolidation of financial service institutions (FSIs) and the establishment of new bank holding companies, TowerGroup believes, account-to-account (A2A) transfer volume will reach a projected $127 billion in 2012.

The TowerGroup Research Note titled “Noncash P2P Payments: Checks in Decline Still Rule the Roost,” is available to qualified members of the press for review. To request a copy of or to arrange an interview with Ms. Roth, please contact Erica Chase at 212-704-44693 or erica.chase@edelman.com.

About TowerGroup: TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world’s leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit www.towergroup.com for more information.

1 TowerGroup classifies P2P payments into five categories: repayment, account-to-account (A2A), family support, informal purchases, and informal services.

Contacts

Edelman for TowerGroup
Erica Chase, 212-704-4469
erica.chase@edelman.com
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