Implications of Electronic Mail and Message Systems for the U.S. Postal Service Page: 26

26 . Implications of Electronic Mail and Message Systems for the US. Postal Service

EFT Diversion

The next step in the market penetration
model was to subtract from the baseline mail
stream the mail that could be diverted to EFT.
While for some purposes EFT might be viewed
as a special type of EMS, other EFT applica
tions, such as the point of sale use of debit
cards, could eliminate certain payment
messages altogether. Accordingly, in this
study EFT was considered to be separate from
EMS. Mail diverted to EFT was considered
unavailable for EMS. For mainstream seg
ments such as bills and statements where both
EFT and EMS could produce diversion, EFT
diversion was assumed to occur first. The
residual mail volume in each mail segment
after EFT diversion was then considered the
potential market for EMS diversion. The
diversion to EFT was modeled using the logis
tic substitution process described in appen
dix B.
Based on the results of a separate OTA
study,4 current trends suggest that a signifi
cant consolidation of bills and financial state
ments is likely to take place via EFT, but that
it will take many years. OTA has assumed
that the use of EFT for bills and financial
statements in the long run would result in a
90 percent reduction in total bills and state
ments received via conventional mail by the
average household or nonhousehold. Thus, the
maximum potential fraction (or penetration
potential) of bills and statements that could
be diverted to EFT is 0.9, as shown in table
5. OTA assigned an initial growth rate of 20
percent, as indicated in table 5. Given the
nature of the logistic substitution process, a
20 percent initial growth rate would decline to
a 5 percent growth rate for the 20th year out.
It would take 20 years to progress from 5 to
75 percent of the maximum potential diver
sion. The year of 5 percent diversion (time
when 5 percent diversion occurs) was esti
mated to be 1985. The year of 75 percent diver
'See OTA report Sleeted Electronic Funds Transfer Issues:
Privacy, Security, and Equity, OTA BP- CIT 12, March 1982.
See also EFI The Next Fifteen Years, Electronic Banking, Inc.,
June 1980, a working paper prepared for the above report.

Table 5.-Assumptions About Rate of EFT
Year of 5 percent penetration-1985
Year of 75 percent penetration-2005
Initial exponential growth rate (1985)-20 percent
Growth rate at 50 percent penetration (year 2000)-
5 percent
Penetration potential-0.9 for bills and financial state-
1.0 for negotiable instruments
Key technologies
Automated teller machines (ATMs)
25,000 in operation (1981)
ATMs estimated by industry to at least double by 1990
and could increase to 120,000 (an annual growth rate of
roughly 10 to 20 percent):
. deposit
.cash withdrawal
* bill or loan payment
.cash advance
Point-of-sale terminals
87,500 in service (1981):
* check validation
. credit card authorization
* debit of transaction balance
Telephone bill payment (TBP)
302 financial institutions offer (1980)
TBP transactions estimated by industry to be growing by
27 percent a year:
. bill or loan payment
* account status inquiry
. interaccount transfer

SOURCE Off Ice of Technology Assessment, see app

A, table A-3 for further

sion was estimated to be 2005. As shown in
table 5, this growth rate is generally consist-
ent with rates of growth projected by industry
for key EFT technologies.
Likewise, the results of the OTA study sug
gest that EFT is likely to displace checks and
other paper based negotiable instruments, but
that this displacement will take many years.
OTA has assumed that all such instruments
eventually could be displaced by EFT. Thus,
the EFT penetration potential is 1.0 for nego
tiable instruments sent to households or non
households. As with bills and financial state
ments, OTA has assigned an initial growth
rate of 20 percent and estimated the year of
5 percent diversion to be 1985. (See app. A,
table A 3, for details.)
The OTA assumptions for bills and finan
cial statements and for negotiable instruments
were optimistic in the sense that the actual

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United States. Congress. Office of Technology Assessment. Implications of Electronic Mail and Message Systems for the U.S. Postal Service, report, August 1982; [Washington D.C.]. ( accessed September 21, 2017), University of North Texas Libraries, Digital Library,; crediting UNT Libraries Government Documents Department.