BROOKFIELD, Wis. — Rumors of the death of paper checks have, once again, been greatly exaggerated.
In fact check volume in the United States remained essentially flat between 2011-12, according to internal data at Fiserv, a financial services technology provider.
"With the advent of mobile capture specifically, taking a check as a payment type for P2P has become so easy and convenient that people are willing to write a check where before they never would," said Gary Brand, director of source capture optimization at Fiserv.
Fiserv said it processed four billon checks in both 2011 and 2012, representing about one in five checks in the United States. That figure represents a flattening out of what had been a gradual decline in checking. Brand said that numbers from the Fed predict a decline of 6% to 8% per year.
But that estimate is from 2009, before many financial institutions launched remote deposit capture technology.
Other check processing firms, such as Harland Clarke, declined to be interviewed for this story.
Business checking continues to drive check activity, said Brand, noting that "the greatest usage of checks is still in the business-to-business type relationship."
One factor that may have helped spur the flattening of the decline in checking is that in some cases during the economic downturn, there were small businesses that "would actually be more willing to take a check rather than a credit card due to those fees eating into minuscule margins," according to Brand.
He cited a finding from Barlow Research Associates that 60% to 80% of business-to-business payments are still made via check. "We haven't seen significant decline on the B2B side; we continue to see B2B to be pretty strong," said Brand.
While B2B check usage has flattened out, said Brand, P2P usage continues to decline - a trend that Brand says is "not irrelevant despite the small portion of P2P checks." But rather than seeing a 6-8% annual decline, Brand predicted that due to increasing RDC availability personal check usage will be somewhere between flat and a 3-4% decline.
How CUs See It
At least one credit union is reporting a leveling off in check usage thanks to mobile deposit capture technology.
"For us it's been a resurgence a little bit," said April Clobes, VP/COO at Michigan State University FCU in East Lansing, Mich. "Our numbers in the last year were 3.8 million, and we've been pretty steady at 3.8 million for the last three years. It's not that they're growing, but it's not dramatically declining, either."
MSUFCU has seen more than $60 million deposited via mobile RDC since the product was introduced in September 2012 (more than 122,000 individual deposits). Since launching remote deposit by scanner in March 2012, the $2.4 billion credit union has seen more than $52 million deposited via that channel (more than 64,000 deposits). Since January, said Clobes, mobile deposits have increased by an average of 15% each month.
The credit union primarily serves students, staff and faculty at Michigan State University, and about 20% of its members live out of state. Since launching mobile deposit a year ago, said Clobes, some members that had moved out of the area and closed their checking accounts have re-opened those checking accounts because they can now more easily make deposits.
Some other credit unions, however, said they continue to see a decline in check usage.
At Navy FCU in Vienna, Va., the nation's largest credit union, check usage continues to decline. The $54 billion institution implemented mobile RDC about two years ago, and check writing has declined by 24% in that time, according to Mike Christian, manager of savings and checking.
Navy Federal has incented members to use mobile deposit - including offering $5 and $10 certificates that can only be redeemed via mobile deposit - and about 20% of deposits are now made via mobile device. But only about 16% of members are enrolled in mobile RDC, while only 8.5% of members have actually used it.
"Awareness is still an issue here," Christian observed. "Yes we've had some great success in a year and a half, but you'd be surprised at the number of members that do not know what you offer. So we have to get that out in front of them at every opportunity we get."
MSUFCU's Clobes posited that one reason mobile has precipitated a flattening of check volumes is due to the average age of the membership there, which at 37 years old is 8-10 years younger than the average CU member. More than 60% of the CU's membership is in Gen X or Gen Y, according to Clobes.
The Checkless Generation
Fiserv's Brand said those aren't the consumers who will be the last generation to use checks. Credit unions need to look at a younger demographic.
"As we look at the younger generation coming up that don't have the affinity for checks and aren't familiar with that as a payment type, I think we'll see the potential for acceleration in that decline," said Brand. While he wasn't willing to make specific long-range predictions, he noted that "at some point you'll hit the tipping point of that generational dynamic that doesn't use that as a payment type."
But, he noted, just because young people aren't writing checks doesn't mean that plenty of older consumers aren't still using them. "The fact that my sons don't write that check doesn't mean that my wife and I don't... because quite frankly that's the only payment vehicle that's allowed in some cases," he said.
Brand says don't expect Gen Y/Millennials to be the ones to put the final nail in the coffin of checks. "Gen Y is way too big a swath of the demographic to really be a tipping point," he said. "You have to have a lot of things come in line to make that happen. You have to have the perfect storm for the tipping point - a generational dynamic, robust technology in the marketplace that's easily accessible by all those users, and a regulatory framework that supports that type of trending."
In other words, don't expect to see checks completely die off for a good while yet.
"Freshmen in high school and younger, it's that generation that's going to really precipitate the final significant decline in check volume over their professional careers because the technology will be there," said Brand. "It's already there in part today; regulatory dynamics will quickly follow and be fine-tuned to facilitate that, and you'll have a generational money-movement expectation that's different even for Gen Y."
