Ahhh, checks. Are you still using those? Toward the end of each year, some payments consultant or financial services industry cognoscenti declares that checks are dead. And while industry data backs up the fact that check usage is declining, I am one payments nerd who definitely thinks the check will continue to die a slow death that looks more and more like an asymptote (remember your college geometry?!) over time.
This somewhat tongue-in-cheek article from the Wall Street Journal on check-writing is absolutely spot on when it points out that even today, Americans write more than 17 billion (yes billion) checks a year. Some back-of-the-envelope math means that this comes out to roughly 56 checks per person per year (assuming a US population of 324 million). And if you remove the roughly 20% of the US population that are children who are not likely to have checking accounts, then the number of checks-per-person spikes to closer to closer to 66 checks per person per year, or more than 1 per week that each of us adults writes. While playing with the aggregate figure is only helpful up to a certain point, I think you would agree that that these mathematical outcomes point to the fact that checks are not going away anytime soon.
In fact, there is a recent Federal Reserve study entitled "The Federal Reserve Payments Study 2016" that explains that the decrease in check usage that we've witnessed in the US has actually slowed somewhat. Specifically it says "The decline of checks over the period was slower than previous studies had shown for prior periods since 2003." and also "The decline of checks over the period was slower than declines in previously documented periods since 2003."
So what's a bank to do? How should a small credit union and a large bank handle this situation?
- Fraud Prevention Advice: Have good fraud prevention plans in place. The check is still in wide use and circulation and therefore fraud detection techniques remain important. As this 2015 Association of Financial Professionals report highlights, "Checks remain the most-often targeted payment method by those committing fraud attacks. Check fraud also accounts for the largest dollar amount of financial loss due to fraud."
- Customer Service: Yes, it might be annoying to some of your bank personnel to handle checks, but they are still used by a portion of your client base. Don't forget that and don't treat those customers poorly.
- Migration Plans: Think about how to communicate to your client base that, while checks may still have a role to play, they may also be replaced by other technologies and services. Educating your client base in a sensitive way is important and obviously might be done with a little bit of carrot and a little bit of stick, depending on how rapidly you want to move people away from checks.
- Leverage the Check: Once you've recognized that the check is still going to be around for the remainder of your career, think creatively how you can leverage the check. What new techniques and services can you offer that your competitors don't? How can you welcome the check-writing segment of your bank in a way that makes them "sticky" customers for life?
You might not like checks. You might be one of those people who times your own payments interactions in the checkout line without ever thinking about balancing a checkbook. And, you might think that people who are still using checks are from the dark ages. Nonetheless, if you work in a retail banking environment, take check processing seriously and don't dismiss it out of hand; doing so might cause you unwanted fraud and customer service headaches that otherwise you wouldn't encounter.