Market Research Study Reveals Attitudes Toward ACH

What motivates a person to sign up for direct payment? What do companies consider the biggest benefit for offering direct deposit to their employees? Who are considered the most reliable sources of information on electronic payments?

These are some fundamental questions the Federal Reserve and others in the financial services industry set out to answer about electronic payments. In this issue of Payments Quarterly we'll discuss the findings of a national study about direct deposit. In the next issue, we'll discuss direct payment.

Over the past several years, the Fed has worked together with other organizations to educate companies and consumers about ACH. As we continue to move forward with these marketing efforts, we realized a better understanding was needed of consumer and business perceptions and attitudes toward direct payment and direct deposit.

To help us with this initiative, the Federal Reserve System hired Shugoll Research and Vantis International to conduct a market research study. The primary objectives of the project were to determine the current awareness of direct deposit and direct payment, identify different market segments and their attitudes, identify the effectiveness of promotional messages and vehicles, and uncover the key drivers of various payment types.

To start the research, Shugoll conducted a literature review in late 1997 and examined all existing studies on electronic payments. This review showed there was very little information available on direct payment, and most studies on direct deposit were several years old. Additional research was clearly needed.

Before Vantis began the quantitative portion of the research, Shugoll conducted several focus groups to explore some key issues and help refine the information to be included in the surveys. Vantis then developed surveys and received responses from approximately 1,300 consumers, 900 businesses and 100 financial institutions. Below are some of the key findings learned through the focus groups and surveys.

Consumer Findings

Fifty-five percent of consumers receive one or more payments by direct deposit. Among users, 97 percent are extremely or very satisfied with the service.

Payroll represents the greatest potential for direct deposit because only 46 percent of recipients receive direct deposit, and consumers expressed high interest levels. Other opportunities to expand direct deposit exist, especially for expense and travel reimbursements, and health care prescriptions.

The key attributes that drive the use of direct deposit among users are: security; trust as a payment method; convenience; speed and consistency; and reduction of bank fees and transaction costs.

You can encourage non-users to try direct deposit by: building trust; ensuring security; and providing easy problem resolution.

Non-users of direct deposit tend to have needs for personal recognition and control. They like the feeling of being handed checks; it is considered personal recognition for a job well done.

If incentives were offered, such as free checking, written verification of payment, or having the money deposited two to three days earlier, more than 50 percent of non-users would sign up for direct deposit.

Business Findings

Overall, 32 percent of businesses surveyed offer direct deposit to their employees.

Businesses primarily consider direct deposit an employee benefit, not a cost-saver.

Among the stated barriers to offering direct deposit were: perception that it is too costly or that there is not enough demand; concern over employee turnover rate; lack of need or interest; need for further research; and concern that some employees do not have accounts at financial institutions.

The biggest incentives that would increase direct deposit usage among companies is compatibility with their general ledger systems and free checking for employees.

In terms of learning about direct deposit, 83 percent of respondents said financial institutions are the most prevalent sources of information.

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