J.A. "Gus" Blanchard ranks among the best sources of information on the coming of the checkless society.
As president and chief executive officer of Deluxe Corp., Mr. Blanchard, 54, heads a company that prints more than half the blank checks used in the U.S. market. And its strategy represents a superbly educated guess about when banks' initiatives in electronic payments will begin to reduce check volumes.
That's why many took note when Mr. Blanchard announced that Deluxe would be consolidating its check printing operations. This year the St. Paul- based company will scale back to 15 printing facilities, from 41.
The move speaks to the expectation that check growth will end sometime in the next few years. But even Mr. Blanchard says predicting just when is anything but an exact science.
Rises in electronic bill payment, direct deposit, and card-based transactions have begun to eat into check volume growth, he said, but "check writers are proving to be remarkably sticky in their loyalty.
"They want to keep doing what they are doing."
According to Deluxe and other trackers of the checking business, check growth has slowed from 6% a year in the early 1990s to less than 1% last year.
"I think checks actually will start peaking about 1998, and start falling off into the year 2000, mostly due to government mandates and the business-to-business area," said Jack Stephenson, principle at McKinsey & Co.
However, bankers will not be able to throw away their check processing equipment anytime soon: Over 64 billion checks were written in 1995, according to McKinsey.
That's music to Mr. Blanchard's ears, since it means Deluxe has time to establish business lines to offset an eventual drop in check printing income.
In fact, for many years the company has operated a unit that stands to gain from the very business lines that are eating into check volumes. Deluxe Data Services has long been focused on processing card transactions, and it handled over two billion credit and debit transactions last year.
As some of its core customers - most notably the regional automated teller machine networks-have taken their processing services in-house, Deluxe Data has increased its emphasis on software sales.
Deluxe Corp. also has a growing array of other business lines to rely on for new revenue.
"We are putting a good bit of our time, and not an inconsequential amount of our investing, into what we call direct-marketing or direct- response businesses," Mr. Blanchard said.
Deluxe also has formed a marketing alliance with Online Resources and Communications Corp., McLean, Va., to resell home banking and bill-payment services to banks.
Further, Deluxe bought American Data Resources Inc., a provider of proprietary data bases, and is expanding its international business through a partnership with an India-based provider of training software, HCL Corp.
But as even as these ventures begin to pay dividends, Mr. Blanchard stresses that the check is not doomed.
"Banks earn a substantial profit from check printing," he said. "If they were not making money on it, they would have incentives to quickly try and find alternatives."
Bankers, for their part, continue to try to reduce the costs associated with handling checks.
The largest of the check processors have invested in image processing equipment and are adding capabilities, such as image archiving, that can reduce the cost of handling paper items.
Representatives of these institutions said the industry is far enough away from a meaningful reduction in check volume that investments in multimillion-dollar imaging systems (from vendors such as International Business Machines Corp., Banctec Inc., NCR Corp., and Unisys Corp.) are worthwhile.
One of the most watched of check imaging projects is at Chase Manhattan Corp. The nation's largest banking company increased its volumes by 60% as a result of its merger with Chemical Banking Corp. It now handles between 12 million and 16 million items daily.
The imaging systems that process these checks will cost more than $50 million when fully installed, bank executives said. But these costs will pale in comparison to the savings the bank expects from reducing the amount of paper it handles.
"We believe that there are opportunities to do a better job, and a more efficient job, with paper checks," said Tom Vicknair, executive vice president at Texas Commerce Bank, a Houston-based unit of Chase that some believe to be the most aggressive user of check image technology.
The investment in image technology is Chase's nod to the fact that people are going to continue to write checks for some time to come.
"Customers are comfortable with the value of writing checks," said Michael J. Pasiecki, senior vice president at Chase and head of the bank's check and commercial loan operations. "We are not going to force our customers to move to an electronic service until they are ready to do so."
But he and others acknowledge the imminent decline of check volumes.
One of the forces driving a reduction is a provision within the North American Free Trade Act of 1994, which ultimately will require about 90% of all U.S. businesses to file taxes electronically by 1999. The mandate should eliminate more than 65 million paper-based transactions each year, officials said.
Another contributor: the Debt Collection Improvement Act of 1996, which requires that nearly all government agency disbursements-including payments made to welfare recipients-be paid electronically. The measure would affect 850 million paper check transactions a year.
Though the aggregate volume of these two efforts hardly puts a dent in check growth, they should "have what I call 'a door-opening effect'" on the move away from paper checks, said Paul Connolly, first vice president at the Federal Reserve Bank of Boston.
When check volume wanes, Mr. Blanchard, said Deluxe Corp. will be ready.
"We are approaching some sort of a plateau," he said. "Inevitably, at some point in the future, the last increment of growth will occur."
But "no payments mechanism has ever disappeared from civilization," Mr. Blanchard observed.
