Electronic Payments Now Account for the Majority of Consumer Payments Across All Three Major Payment Venues

Consumers are increasingly using electronic payments at the expense of cash and checks, according to a new nationwide consumer payment preferences study conducted by BAI and Hitachi Consulting. The research was sponsored by First Data Corporation and its STAR® Network, Harland Clarke, MasterCard Worldwide, Metavante and PULSE.

The 2008 Study of Consumer Payment Preferences found that 63 percent of all consumer purchases are made using electronic payment methods. Electronic payments now account for the majority of payments across all three major payment venues—including bill payment. Internet payments have always been predominantly electronic, almost by default. For in-store payments, the balance between paper and electronic payments shifted in 2003, leaving bill payment as the last bastion of paper-based payments. This is no longer the case, however, as paper-based payments’ share of bill payments shrank from 55 percent in 2005 to 38 percent in 2008.

"Bill payment has historically been a stronghold for checks,” said Ajay Nagarkatte, managing director of Syndicated Research at BAI. "But increases in the adoption and usage of online bill payment over the past three years have significantly eroded the number of paper checks being mailed to pay bills.”

Retail store purchases account for the majority of consumer payments. For in-store purchases, the migration to electronic payments continues to be driven by the increasing popularity of card-based payments, particularly debit. PIN and signature debit now account for 37 percent of consumers’ in-store purchases, up from 21 percent in 1999.

Checks and now cash are giving way to card-based payments at the point of sale. Checks’ share of in-store purchases has declined from 18 percent in 1999 to 8 percent in 2008, and after holding relatively steady for the past several years, cash has dropped to 29 percent. Contrary to robust forecasts, gift/prepaid card’s share of purchases has not increased significantly over the past three years.

Looking forward, electronic payments will likely continue to erode the share of payments made using paper-based methods. As one young consumer observed when answering the survey, "paper is old school!”, and over the next two years, consumers expect to increase their use of debit and decrease their use of checks and gift/prepaid cards.

"I expect the shift from paper to electronic payments to continue as consumers increase their use of cards and new forms of electronic payments gain traction,” said Chris Allen, director of consulting services in the Financial Services Practice at Hitachi Consulting. "Although the proliferation of payment methods increases the complexity of managing payments, it also creates opportunities for financial institutions and payment service providers. There are a lot of changes taking place, and it’s an exciting time to be in the industry.”

About the Study

The 2008 Study of Consumer Payment Preferences is the definitive guide to how consumers pay in different venues, why, and how their payment habits are likely to evolve going forward. The study provides insights into consumer behavior and preferences across three important payment venues: retail point-of-sale (in-stores), Internet purchases, and bill payments. Findings from the 2008 Study are based on an online survey administered by Harris Interactive, and completed by a nationally representative sample of 3,308 U.S. consumers in June 2008. The sampling error for the national sample was +/- 1.7 percent at a 95 percent confidence interval.

This study is the fifth in a series of studies tracking consumers’ payment habits, preferences and their migration from paper to electronic payments, and is a follow on to studies conducted in 1999, 2001, 2003, and 2005 by Dove Consulting (which was acquired by Hitachi Consulting in 2005) in conjunction with the American Bankers Association. To inquire about purchasing the study, please call Chris Allen, director of consulting services, Payment Strategy Group, Hitachi Consulting, at 617-753-9250 or Ajay Nagarkatte, managing director, Syndicated Research, BAI, at 312-683-2486.

About BAI

BAI is the financial services industry’s partner for breakthrough information and intelligence needed to innovate and stay relevant in an evolving marketplace. For more than 80 years, we have focused on advancing the industry by offering unbiased education and research. Our offerings are as diverse as the industry, and include premier events such as BAI Retail Delivery Conference & Expo, ground-breaking research and performance metrics, professional learning and development programs, and in-depth editorial coverage through BAI Banking Strategies. Visit www.BAI.org for more information.

BAI is Bank Administration Institute and BAI Center.

About Hitachi Consulting Corporation

As Hitachi, Ltd.'s (NYSE: HIT) global consulting company, with operations in the United States, Europe and Asia, Hitachi Consulting is a recognized leader in delivering proven business and IT strategies and solutions to Global 2000 companies across many industries. With a balanced view of strategy, people, process and technology, we work with companies to understand their unique business needs, and to develop and implement practical business strategies and technology solutions. From business strategy development through application deployment, our consultants are committed to helping clients quickly realize measurable business value and achieve sustainable ROI.

Hitachi Consulting's client base includes 25 percent of the Global 100 as well as many leading mid-market companies. We offer a client-focused, collaborative approach and transfer knowledge throughout each engagement.

For more information, call 1.877.664.0010 or visit www.hitachiconsulting.com.

About Hitachi, Ltd.

Hitachi, Ltd., (NYSE: HIT) (TSE: 6501), headquartered in Tokyo, Japan, is a leading global electronics company with approximately 390,000 employees worldwide. Fiscal 2007 (ended March 31, 2008) consolidated revenues totaled 11,226 billion Yen ($112.2 billion). The company offers a wide range of systems, products and services in market sectors including information systems, electronic devices, power and industrial systems, consumer products, materials, logistics and financial services. For more information on Hitachi, please visit the company's website at http://www.hitachi.com.

About the Sponsors:

About First Data

First Data, owner of the STAR® network is a global leader in electronic commerce. First Data powers the global economy by making it easy, fast and secure for people and businesses around the world to buy goods and services using virtually any form of payment. Serving millions of merchant locations and thousands of card issuers, First Data has the expertise and insights to help customers accelerate their business. For more information, visit www.firstdata.com.

About Harland Clarke

Harland Clarke Corp. is a leading provider of integrated payment solutions, marketing services, technology solutions, and best-in-class security to approximately 15,000 financial institutions, as well as major investment firms, B2B clients, small businesses, and individual consumers. Its approximately 5,800 employees work from a performance excellence business model to help financial service companies build sustainable and profitable relationships with their customers. With corporate headquarters in San Antonio, Texas and a regional office in Decatur, Georgia, Harland Clarke also operates manufacturing and contact center facilities nationwide. Harland Clarke Corp. is a wholly-owned subsidiary of Harland Clarke Holdings Corp., which also wholly owns Harland Financial Solutions Inc. and Scantron Corporation. Please visit www.harlandclarke.com for more information.

About MasterCard

MasterCard Worldwide advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 18 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to http://www.mastercard.com.

About Metavante

Metavante Technologies, Inc. (NYSE:MV) is the parent company of Metavante Corporation. Metavante Corporation delivers banking and payments technologies to over 8,000 services firms and businesses worldwide. Metavante products and services drive account processing for deposit, loan and trust systems, image-based and conventional check processing, electronic funds transfer, consumer healthcare payments, electronic presentment and payment, business transformation services, and payment network solutions including the NYCE Network, a leading ATM/PIN debit network. Metavante (www.metavante.com) is headquartered in Milwaukee.

About PULSE

PULSE is one of the nation’s leading ATM/debit networks, currently serving more than 4,500 banks, credit unions and savings institutions across the country. PULSE is owned by Discover Financial Services (NYSE: DFS). The network links cardholders with more than 265,000 ATMs, as well as POS terminals at retail locations nationwide. The company is also a valued resource for industry research related to electronic payments and is committed to providing its participants with education on evolving products, services and trends in the payments industry. For more information, visit www.pulse-eft.com.