The Check: Still Thriving After All These Years
Have you seen the headlines?
* "Check use plummeting"
* "Check may not be in the mail"
* "Check writing seen as thing of the past"
There have been many stories about the demise of the check since the Federal Reserve released findings of its study of the payments system in 2001, then revised it last year. The study revealed checks have declined from about 85 percent of non-cash payments in 1979 (the year of the last study) to about 60 percent today.
Behind the headlines
Certainly, electronic payment forms - including e-payments, debit and credit cards, and online banking - have experienced strong growth. But while a drop off in check use may capture headlines, a closer look at the Fed Study reveals the check to be remarkably resilient:
* Overall check use has increased 54 percent since 1979 and checks remain the first choice among U.S. consumers.
* Of the 80 billion non-cash retail payments made each year, some 50 billion are made by check.
* Almost 90 percent of U.S. households have a checking account.
* $48 trillion travels through the monetary system by checks and only $7 trillion through all other electronic payment systems combined.
* Of the $55 trillion combination of checks and electronic payments, 86 percent is attributable to the check.
* The amount of money that's attributed to checks has nearly doubled - from $24 trillion in 1979 to nearly $48 trillion today.
* A check is 65 percent more likely to be used than all electronic payments combined.
* Consumers continue to favor checks for record keeping, budgeting, person-to-person payments, convenience and familiarity.
The "high-tech check"
The check has embraced technology to become a vibrant, adaptable, safe transaction tool.
The majority of checks (nearly 80 percent) are now verified at the point-of-sale, providing convenience and security for consumers and business. The Internet is now the check's fastest-growing ordering channel for checks. Consumers can view check styles, make personal choices, and order - all in the same process.
Digital imaging and online banking programs already allow many consumers to view cancelled checks. The proposed Check Truncation Act (Check 21) would facilitate electronic check truncation and allow an image of a check to be the legal equal of the original check - making for a more efficient check processing system.
Check electronification - where a check is scanned for account information at the register - turns a paper check into an electronic transaction, cutting costs for stores and preventing fraud losses. It also makes checks faster and easier for a financial institution to process.
Signature verification systems and the use of new account screening software are popular fraud prevention strategies. Check printing technologies integrate a variety of features that protect against alterations and duplication. For example, the SAFECheck Supercheck, designed by former master forger Frank Abagnale, contains 12 security enhancements. Look for a padlock icon on your check. The symbol means your check contains security features recommended by the Check Payment Systems Association (CPSA), the check industry's leading trade group.
Staff training programs - such as the newly introduced Liberty-MyDAS fraud education module - have proven to also be effective in the fight against fraud.
A matter of choices
Many of your members like the convenience of Internet banking and bill pay. But that doesn't mean they don't like the check. In fact, the checking account remains THE factor in building member relationships and creating significant value for your credit union. Here's how:
* CUNA Research indicates most credit union members consider their primary financial institution (PFI) to be the location of their checking account, and members will buy more products and services and borrow more money from their PFI.
* The checking account provides a solid source for low-cost funds.
* Increasing your checking account base leverages the fixed costs of branches and your back-office operations. If you can double the number of checking accounts, you can cut your fixed costs per account in half.
The Federal Reserve itself is investing significant resources in the future of the check by, "redesigning its infrastructure for providing both paper and electronic check services."
The Check Modernization initiative is a "comprehensive strategy to standardize and reengineer our check infrastructure over the next several years." Why the investment? Here's the Federal Reserve's explanation:
"Twenty years ago, many predicted that paper checks would by now become obsolete. We now know that - despite all the technological advances - the power of consumer preferences has resulted in a very different outcome. Paper checks are likely to continue as a dominant form of consumer payments, which means we need to develop more efficient ways to clear checks than the traditional sorting and delivery of paper." (Source: the Federal Reserve's Financial Services Web site: www.frbservices.org).
Is the check going away? A closer look at another headline helps answer that question:
"Check Writing Seen Being Reduced in Foreseeable Future"
The headline appeared in the Wall Street Journal. The date: Feb. 10, 1966. The lesson: More than 37 years later, don't count out the check.