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Drop in Direct Deposit Growth Spurs Treasury
Campaign – Go Direct
Sept. 14, 2004 – Concerned with a sharp decline in
the growth rate of citizens taking advantage of the direct deposit for
government payments, like Social Security, and facing the first wave of
baby boomer retirements, the U.S. Department of the Treasury is
launching a new campaign – Go Direct - to educate Americans on the
advantages of the program.
Retirees and other individuals, primarily senior
citizens, who receive their government payments by direct deposit are
significantly less likely to have a problem with their payment than
those who get checks. Yet, and many Americans still receiving paper
checks are elderly, disabled or low-income individuals, who would
benefit most from this safer, easier and faster payment alternative,
according to the Treasury.
The Treasury commissioned a study that revealed
check recipients' reluctance to adopt direct deposit and as a result of
the study, "Understanding the Dependence on Paper Checks," the Treasury,
together with the Federal Reserve, is launching a six-month pilot
marketing campaign to increase direct deposit use among Social Security
and Supplemental Security Income (SSI) beneficiaries.
The pilot campaign, called Go Direct, will focus on
10 markets: the counties surrounding Chicago and Springfield in
Illinois; Knoxville, Memphis and Nashville in Tennessee; Austin, Dallas,
Houston and San Antonio in Texas; and all of Puerto Rico. These 10
markets were selected because they represent large metro areas and
capital cities within states having a high number of federal benefit
check recipients.
"Without a doubt, electronic payments are superior
to checks in terms of safety, speed and convenience," said Don Hammond,
Treasury Fiscal Assistant Secretary. "Many of the people who still use
checks would benefit the most from direct deposit. This research
provides valuable insights on how we can reach out to these payment
recipients so that they can fully understand and take advantage of the
benefits of direct deposit."
Direct deposit use among federal beneficiaries grew
rapidly in the late 1990s but has largely leveled in recent years.
Despite ongoing educational efforts, the growth rate of direct deposit
has slowed to less than 1 percent per year for Social Security payments.
The Federal government issues more than 13 million benefit checks
monthly, with Social Security and SSI representing the vast majority.
Direct deposit offers a significant cost savings to
taxpayers. The Treasury mails about 160 million benefit checks a year,
at an additional annual cost of $100 million in postage, printing and
other costs. Unless more people choose direct deposit, the cost of
printing and mailing checks will skyrocket in the next few years as
America's 77 million baby boomers start hitting retirement age in 2008.
Treasury has determined that for every check payment converted to direct
deposit, the government saves 62 cents that can be invested in making
payments to future generations.
Research Results - Who Chooses Checks, and Why?
The Treasury study uncovered a number of reasons
why benefit recipients are reluctant to switch to direct deposit.
-- Emotional ties. Many check recipients said they
prefer a physical check because it provided a welcome ritual that
reminded them to pay bills and balance their checkbooks. Check
recipients feared that direct deposit would take away their sense of
control, whereas getting a check in the mail felt like "cash in hand."
-- Inertia. Some of those interviewed said they
were willing to switch, but simply hadn't done it yet, while others said
they had no incentive to make a change.
-- Information gap. The research revealed a
fundamental lack of understanding about electronic payments. While
nearly all respondents said they were familiar with direct deposit, most
were unable to explain accurately how it worked.
-- Mechanical gap. Check recipients were also
significantly less likely than direct deposit users to have a bank
account or trust the banking system. Of those surveyed, 27 percent of
Social Security and 68 percent of SSI check recipients did not have bank
accounts. Yet nearly half of Social Security recipients without bank
accounts said they regularly cashed their benefit checks at a bank or
credit union.
In general, check recipients varied widely across
geography, race and economic status. The research shows that nearly a
third (31 percent) were at least somewhat inclined to switch to direct
deposit, while more than half (53 percent) were somewhat to very
resistant. Those who were more receptive to switching tended to be more
comfortable with technology and trusting of banks, were younger, more
urban, and more likely to belong to a minority group than the neutral or
resistant groups.
"Direct deposit is an important component of the
modern economy," said Gary Stern, president of the Federal Reserve Bank
of Minneapolis and chair of the Federal Reserve's Financial Services
Policy Committee. "The Federal Reserve is supporting the Treasury in the
Go Direct campaign because one of our core responsibilities is to foster
an efficient and effective payments system. This campaign facilitates
the elimination of costly check payments in our society." Treasury
asked the Federal Reserve, acting as its fiscal agent, to conduct the
research study and develop and implement an aggressive pilot campaign
geared at converting a large number of checks to direct deposit.
Go Direct Pilot Campaign
The Go Direct campaign is expected to launch this
fall, and will seek to increase the number of direct deposits in the
pilot markets. The campaign will focus heavily on grassroots outreach to
benefit recipients, largely through partnerships with community-based
organizations and financial institutions.
Ken Fergeson, chairman of the American Bankers
Association, one of many national organizations that are champions for
the Go Direct campaign, said: "We know from Treasury's research that 80
percent of people getting Social Security checks come into the lobbies
of financial institutions to cash their checks. Banks across this
country are ready to do what we can to convince people that direct
deposit is the way to go."
Go Direct has established a toll-free number for
beneficiaries to call to sign up for direct deposit: 1-800-333-1795
(English) and 1-800-333-1792 (Spanish).
Research Summary
The Treasury's study was conducted by research and
consulting firm WirthlinWorldwide. For a high-level summary of the
research findings, please see
http://www.GoDirect.org/media/research
.
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