o rework a well-known historical quote, reports of the death of checks have been greatly exaggerated. True, after decades of increasing dependence, Americans are beginning to curb their check writing. But let's not forget that we're still papering the economy with nearly 40 billion paper checks a year. All of the available electronic options for payments, combined, add up to only three-fourths of that amount (at about 30 billion credit card, debit card and ACH transactions last year). It will take many years before the scales tip proportionately to the other side, with electronic transactions dominating the payments system.

The more likely outcome, in my mind, is "hybridization," where consumer checks (tendered as paper) clear the interbank payments system as electronic transactions. (I'll limit the discussion to consumer payments because there's little compelling evidence that corporate payables departments readily will embrace payment hybridization. Besides, the latest Federal Reserve data suggests consumers write the most checks: 51% of the total number written.)

Hybrid checks make sense for consumers and for payment processing. After an initial burst of enthusiasm over debit cards (especially the Visa- and MasterCard-branded offline, or signature, cards), consumers are beginning to rethink their debit card usage. Hybrid checks had a rough start (e.g., POS check-ACH conversion), but newer iterations show real promise.

For example, there's SafeCHECK, which uses ATM networks in support of POS check verification and conversion. With SafeCHECK, the paper check effectively becomes a single-use debit card and is returned to the consumer on the spot. SafeCHECK claims its check conversion totals have been increasing at a rate of 6% a month. If the pace continues, SafeCHECK eventually could eclipse POS check-ACH conversions.

Visa offers a POS check conversion service, too. Expect additional refinements and providers of POS check conversion services once federal legislation sanctioning check truncation is approved. That legislation is on fast track and could be enacted as early as this year.

Some recent iterations of check-ACH conversion are beginning to make sense to consumers, too. The most promising is ARC, a new ACH transaction that converts check remittances sent to lockboxes. Bill payments are the most prevalent reason for checks in today's economy; according to the Fed's data, more than one-fourth of all checks written are remittances. Billers using ARC disclose on the bill statement that checks tendered by billpayers will be converted to electronic payments, and they provide an alternative address to which consumers can send remittances if they'd prefer their checks were not converted.

Several credit card issuers have been using ARC, with great satisfaction, American Express and Wells Fargo among them. Consumer acceptance has been phenomenal, with some billers reporting that fewer than 5% of notified customers are opting out of ARC.

Americans like checks because checks provide a paper trail; disputes can be resolved readily with copies of canceled checks. With ARC, the consumer still writes checks to pay bills and, under ACH rules, has access to copies of those paper checks (imaged front and back) for up to two years. The biller benefits from faster clearing times.

Successful financial services companies will (and should) entrench themselves as providers of payment services. But don't give up on checks yet. Banks and other service providers will need to integrate paper and electronic payments processes for many years to come. A well-honed payments strategy (for at least the next decade) will need to incorporate support for electronic, check and hybrid payments.

Patti Murphy is Contributing Editor of The Green Sheet and President of Takoma Group. She can be reached at patti@greensheet.com