U.S. consumers and electronic banking, 1995-2003

Federal Reserve Bulletin,  Winter, 2004  by Christoslav E. Anguelov,  Marianne A. Hilgert,  Jeanne M. Hogarth

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Preauthorized Debits

Households using preauthorized debits tend to have higher incomes and higher levels of financial assets than non-users and to be headed by someone between 35 and 54 years old with at least a bachelor's degree. Over the period 1995 to 2001, the proportion of households using preauthorized debits rose among households with lower levels of assets, households headed by someone 75 or older, someone who had more education (bachelor's degree or higher), and someone who was black. Because preauthorized debits allow consumers to set up automatic bill payments, which may be especially convenient for older consumers, it is not surprising that the median age of users rose over time, from 45 years in 1995 to 47 years in 2001.

The proportions of households using preauthorized debits to pay utility bills and make housing payments doubled between 1995 and 2001, and the proportion using preauthorized debits to pay another type of bill (for example, to make an auto loan or lease payment) nearly doubled (table 3). The proportion using preauthorized debits to make investments or transfers to other accounts held by the consumer also rose over the years.

Computer Banking

Logic dictates that computer ownership and Internet access are related to adoption of computer banking; however, many studies have been unable to control for those variables. Moreover, although access to computers has become more widespread, households may not be using them for banking and other financial management tasks.

Neither the Survey of Consumer Finances nor the Surveys of Consumers specifically identify households that have computers and Internet connections, although the SCF does ask about household use of computers and financial management software to manage money. In 2001, among households that had bank accounts, 19 percent reported using financial management software, and of that group, 49 percent used computer banking (data not shown). In addition, over the years the SCF has asked respondents whether they use the Internet when making decisions related to credit or borrowing and saving or investing. The proportion that reported using the Internet in making credit or borrowing decisions rose from 12 percent in 1998 to 24 percent in 2001, and the proportion that used the Internet in making saving and investment decisions rose from 9 percent to 16 percent. Data from the 2003 Surveys of Consumers indicate that 95 percent of those who use computer banking use it to monitor their accounts, 64 percent use it to transfer funds between accounts, and 55 percent use it to pay bills (data not shown).

Some data on computer and Internet access are available from the Department of Commerce. In a nationwide survey, 66 percent of individuals reported having access to a computer at some location (home, school, office, community center, library, or elsewhere) in 2001, compared with 54 percent in 1997, and 54 percent reported having Internet access in 2001, compared with 22 percent in 1997. (19) Given the growth in access to computers and the Internet, it is not surprising that the proportion of households that reported using computer banking rose, from 4 percent in 1995 (SCF data) to 32 percent in 2003 (Surveys of Consumers data, table 1). In fact, computer banking was the fastest growing e-banking technology, in terms of the proportions of households using the technology, over the eight years covered by the two surveys.