April 23, 2014Daily Rates & Viewpoints From the Officers & Staff of TIB.

Check Payment Trends

The 2013 Federal Reserve Payments Study offered interesting insights into estimated aggregate trends in non-cash payments. Some of the highlights identified in the study relevant to the check processing world include the following:

·         Over the years, payments have become increasingly card-based… Card use may have replaced check use for certain payments, but the increase in the number of card payments has far exceeded the decline in the number of check payments from 2009 to 2012.
·         Paper check writing continues to persist as a significant portion of noncash payments.
·         Check clearing is virtually all electronic. As in 2009, almost all checks in 2012 were either cleared by electronic image exchange or converted to ACH payments.
·         Increasingly fewer checks enter the banking system as paper at all: in 2012 about one in six checks was deposited by accountholders as an electronic image rather than paper.
Diving further into the check payments portion of the study, we find the following:
·         Checks continue to be used for larger value payments, which include consumer bill payment and payroll transactions as well as high-value business-to-business payments.
·         The average value of checks paid increased from $1,103 in 2009 to $1,420 in 2012.
·         The number of checks deposited as electronic images continues to increase to 17 percent of all checks deposited. 
1)   Of that total, 93 percent of checks deposited by images were by business depositors, compared to 7 percent by consumer depositors. 
2)   Nearly half of the checks deposited as images by consumers were deposited using a mobile device;
·         The number of checks being returned unpaid continued to drop, from 0.5 percent to 0.3 percent. Further, checks had the lowest portion of unauthorized transactions by number and value compared to other payment types, whereas cards had substantially higher total unauthorized transactions by number and value.
For the payer, one of the great benefits of using a check is that you do not need to know or retain any account information about the company or person you are paying. With the existing check infrastructure nearing 100% electronic adoption, there has been both growth and growing interest in use of an electronic payment order, which functions in the form of an entirely digital check. It is believed this service can benefit consumers and businesses by providing a low-cost, useful, reliable payment method. The Retail Payments Office of the FRB Atlanta is currently leading the efforts to determine if this solution may fit into the FRB Services’ strategic plan. 
While challenges and legal hurdles remain, it is possible that we may see the human-friendly check survive in the electronic world, way off into the distant future. Until then, the paper check is a declining but still significant payment mechanism used by consumers and businesses alike.

John Turner
SVP/Service Solutions

Market Levels @ 7:14 AM CDT

TIB Fed Funds & MMDA Rates - Previous Day
Agent 0.20% Prin 0.05% MMDA 0.30%
STAR Prin 0.10% STAR MMDA 0.35%
Key Indices/Commodities
1 - Month LIBOR 0.15% Dow Jones 16514.37
3 - Month LIBOR 0.22% NASDAQ 100 4161.45
1-Yr LIBOR 0.54% S&P 500 1871.60
1-Yr CMT 0.11% Spot Gold 1288.10
Prime 3.25% Spot Silver 19.49
3-yr LIBOR Swap/Offer 0.99% Spot Crude Oil 101.55
5-yr LIBOR Swap/Offer 1.80% CRB Index 311.21
3 Mo - Fed Fund Futures 0.09% 6 Mo - Fed Fund Futures 0.11%
US Treasury Yields US Non-Callable Agency Yields
Yield Maturity Yield Spread
0.00% 90 - Days    
0.00% 180 - Days    
0.38% 2 - Year 0.39% 1bp
0.85% 3 - Year 0.87% 2bp
1.68% 5 - Year 1.80% 12bp
2.66% 10 - Year 3.09% 43bp
3.44% 30 - Year    
226 BPs Yield Curve(2's-10's)
Sample 1x Callable Agency Issues
Description Call Date YTC YTM
FHLB 1 05/22/17 5/15 1.00% 1.00%
Select MBS Levels
Description Coupon Yield Spread/Duration*
15-Yr FNMA 3.00% 2.31% 55 / 4.58
30-Yr GNMA 3.50% 3.06% 83 / 5.62
*Duration @ 12 month Historical CPR
Morning Commentary: David Terrell

New Home sales were way down in March and mortgage applications also declined by 3.3%.  New Homes sales declined by 14% and it was the second worst month since October of 2012.  Manufacturing PMI also declined, but it is still signaling expansion.  The less than favorable data has pushed treasury prices up and the 10 year is below 2.70% again.  Tensions are increasing in eastern Europe, and I lean toward thinking rates will move lower with the slightest escalation.  Mortgage prices have popped up after falling near their lows of the year. 

Information contained herein is based on sources we believe to be reliable but its accuracy is not guaranteed. Customers should rely on their own outside counsel or accounting firm for specific circumstances. The securities, yields or levels discussed herein are for illustration purposes and are not guaranteed, not obligations of any bank, thrift or other entity and are not insured by the FDIC.

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