Tuesday, May 17, 2011

Checks in a 21st Century digital world

By Glenn Wheeler, president, Viewpointe Clearing, Settlement & Association Services, Viewpointe

Is the check dead? You might hear a near-unanimous “yes” to that question; or as others might say more accurately, check usage is simply on a long decline. While check usage has been dwindling in recent years, to paraphrase Mark Twain, the reports of its death are greatly exaggerated. A recent study shows a sizeable segment of the market still writes checks.

As The 2010 Federal Reserve Payments Study, which looks at noncash payments in the U.S. from 2006 through 2009, indicates electronic payments are quickly outstripping check payments; yet checks have remained a significant payment instrument – to the tune of $31.6 trillion in value paid in 2009. While businesses far outweigh consumers in the total dollar value of the checks paid, consumers overall continue to write more checks, according to the findings. And, the study found that while the number of checks written overall has declined more than 7 percent from 2006 to 2009, the volume of consumer-to-consumer check payments has actually grown in that same time period, from 2.2 billion to 2.4 billion.

Where is the consumer-to-consumer check-writing trend heading? Despite its overall decline, there are those who continue to see the value in this traditional payment method. A January New York Times story, Social Security and Welfare Benefits Going Paperless, about the U.S. government’s decision to pay benefits electronically, chronicled how the elderly have continued to opt to receive old-reliable checks versus the government’s proposed electronic deposit of social security payments.

While this one segment of the population alone will not keep checks going indefinitely, technology might encourage some of the smartphone-wielding segment of the population to continue circulating them. According to a recent American Banker article, For Mobile Deposit, Banks Choose Speed-to-Market Over Simplicity, banks are rushing ahead with mobile check deposit technology at the behest of their customers who are using the technology to deposit checks without having to step foot in a bank.

As electronic payments technology continues to evolve – from mobile payment apps to “tap-and-pay” payments using near field communications (NFC), financial institutions and their customers can easily move into a new payments world. Embracing the budding technology will, no doubt, bring new challenges, but with ease of use and the promise of potential growth to the financial institution’s bottom line it could be a worthwhile investment.

Even in our digital age, the old-fashioned check may still stand up as a viable complement to the technologically advanced payment methods.

What do you think?

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