A bright future for checks?

By : Andrew Short

August 27, 2015 12:37 PM

Mobile banking is one of the most important changes to the industry in the last half century. In its wake many predict the death of the check, but can this traditional payment method survive the onslaught of modern technology?


On the one hand, there has been a significant decline in the number of checks being used by consumers.


Checks used to account for roughly half of all non-cash payments in the US as recently as 2003. But since then their usage has fallen away, from 46 percent to just 15 percent in 2012, according to the Federal Reserve’s 'How We Pay' study.


The pace of decline has been rapid, dropping by 9.2 percent every year between 2009 and 2012. By value, the decline was less pronounced but still significant - 6.3 percent per year over the same period.


Other developed payments markets have seen the same trend. The Australian Payments and Clearing Association says check use fell by 66 percent between 2002 and 2012.


But it’s not all doom and gloom for checks. In fact, the very technology that threatens its existence continues to keep them relevant. Check truncation, replacing the physical check with a digital substitute, is helping to ensure checks survive and transition to an electronic world.


The Fed notes that checks "diminishing share of the payments pie shouldn’t mask their significance in the payments system, as they are declining from a dominant position."


Checks still represent 33 percent of non-cash payments by value. In reality, this figure is actually even higher as many checks are converted to ACH payments.


The Fed’s report - The Check Is Dead! Long Live the Check! A Check 21 Update - argued that the pace of decline, which has been rapid, will slow in the coming years thanks to check imaging technology.


“Looking ahead, while payment innovations will continue to whittle away at check’s overall share in total payments, check volume will likely stabilize, with billions of checks being written well into the future,” it said.


Writing off the check has been as popular, and as wrong, as writing off cash. Focusing on processing more efficiently using imaging as well as new and exciting services (e.g. EWS Good Funds network: http://finance.yahoo.com/news/early-warning-ncr-enable-cross-121500059.html?.tsrc=applewf) will allow banks to offer customers the best possible experience. Customers who leverage and/or receive this form of payment instrument will be looking for real-time funds availability as existing networks and schemes are enhanced or new ones are added.

Andrew Short

Mobile and Payments Solutions Manager – NCR Financial

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Andrew has 20+ yrs experience in the software industry covering banking, healthcare and the telecommunications verticals. With past positions in finance, accounting, sales, and prod. mngt, he brings significant mobile and payment expertise to his current role.