At the end of 2008, bank charge-offs for credit card receivables is likely to increase substantially compared to prior years, forcing some financial institutions to consider alternative payment options to credit cards. According to Innovest Strategic Value Advisors, next year looks even worse with banks writing off nearly $96 Billion in 2009 - $23 Billion higher than the $73 Billion estimate for 2008.
This shift in transaction processing could translate into significant growth for a company like MyECheck which processes electronic payments directly from checking accounts. Check writing continues to be the preferred non-cash method of payment accounting for over $40 Trillion each year. A large part of this number involves check payments made by businesses and monthly consumer payments such as utilities, cable, groceries, etc.
While a growing number of banks may force customers to pay for items using an electronic payment system tied to their checking account, consumers may consider switching to companies which still allow them to charge freely on their credit cards. This isn't necessarily because they need the credit, but more to do with potential security issues and the fact that they have become accustomed to earning points with every transaction. Encryption technology needs to be flawless for consumers to risk having funds in their checking accounts exposed to potential fraud activity. If all banks adopt this approach, consumers will have little choice and MyECheck investors will be very happy.