by Guest Blogger Jessica Kane
Myths and Misconceptions About the Decline of Checks
The use of checks has been on a continual decline for the last decade and most believe this will continue at an exponential rate until the eventual death of the check. No one can argue that the use of checks has been on the decline, but the truth is is that this decline has occurred at a linear rate at approximately 1.8-2 billion checks a year.
Every year more checks are being replaced by their electronic counterparts, such as debit cards and ACH payments/echecks, as a means of convenience for consumer and businesses alike. Most would like to believe that this replacement is giving way to higher credit card transactions, but this myth is unfounded. The use of credit cards has remained at a constant rate of approximately 20% for the last decade whereas electronic payments have been increasing each year. This increase can be correlated as a direct effect of the declining use of checks and an increase in the use of electronic funds transactions.
Will Checks Really Disappear Completely?
The disappearance of checks is expected to occur, based on current trends, between the years of 2023-2026. But, is this a true reality? Will they really cease to exist? The majority of checks written today are used to pay recurring monthly household bills rather than to pay for general goods and services.
Studies show that the largest percentage of check users are in the 65+ age category whereas the largest majority of ACH and debit card transactions occur within the younger group of 24-35+ year olds. This generational gap is unlikely to change in the near future and will have a large impact on whether the decline will continue or slow. Most likely, it will result in an eventual bottoming out effect due to this gap. The older generations will continue to pay most of their monthly bills with the old fashioned mail method due to comfort and a lack of knowledge in technology and the younger generations will continue to expand their use of technology based methods.
As the older generations pass away, a gradual decline will most likely begin to occur. As a result of this gap, most businesses will continue to accept checks from this age group forcing an eventual slowdown in the decline only budging when a generation shift occurs. Due to this, the check will continue to live on at least for another couple of decades until the gap closes.
What Can Check Manufacturers Do To Survive?
As the technology tide continues to sweep the nation, it is forcing check manufacturers and banks alike to reconsider business models aimed at ancient methods. It is important for them to address these realities and find ways to become competitive within their industries.
The number one thing that both will have to do to survive is to embrace the change and incorporate new technologies into everyday practices. Checks for a long time were considered the cheapest way to accept payment for goods and services from consumers, but the downside has always been the lack of ability to guarantee the funds. And with credit card companies charging astronomical processing fees for every transaction, businesses in the turn of the century were willing to accept the risk. Recent changes though have included lower ACH and debit card fees, forcing businesses to accept that checks are becoming outdated. If banks want to compete they must work to increase technology of electronic funds transfers and offer competitive processing fees and continually develop the technologies that will make life without checks easier than life with.
Check manufacturing companies have several opportunities to expand their businesses which can help them to thrive during this change. The death of the check will not come swiftly, so they should have ample opportunity to make changes. They will continue to sell printed checks for several years, but they must continue to incorporate new technological advances such as new ways to compete with paypal, google wallet and other check killers.
Here are a few suggestions that may help to retain the use of checks.
- Develop a print format and signature encryption that make the checks virtually impossible for a thief to cash or embezzle.
- Create a circulation system that minimizes or eliminates the steps needed to send and receive checks through the postal system. Transmitting checks through a secure Internet system to be downloaded if desired or retained in an online file may be feasible. An original printed check may be kept as an official record and yet scanned or electronically transmitted wherever it needs to go.
- Bundle services to reduce the number of checks needed. For example, instead of paying each utility bill with a separate check at the end of the month, bundling them to be paid by a single check could save time, effort, and cost. Of course, this will depend on certain companies and sectors being willing to coordinate billing services.
If check manufactures can transition into newer technology, they will continue to thrive and stay ahead of the curve.
Jessica Kane is a professional blogger who focuses on personal finance and other money matters. She currently writes for Checkworks.com, a leading supplier of personal and business checks.
