The Future of Checks
The demise of checks has been predicted for every one of the 20 years that I have worked in the Check Verification and Guarantee industry; however, banks will still handle 63 Billion checks this year.
Over the last few years, industry pundits have continued to herald the "Death of checks" as Debit came to the point-of-sale. Despite the growth in ATMs, direct deposit payroll, and even credit card associations issuing "Check Cards" as a plastic replacement for checks, the number of checks written in the United States has continued to grow.
Over the last five years checks have grown at an annual five percent rate (5%), and many have predicted no decline in growth before the year 2010.
As we approach the year 2000, however, changes are on the horizon. On April 26th the Clinton Administration signed into law legislation requiring nearly all federal payments to be made electronically by the year 1999.
To some, this government mandate is the last nail in the coffin of the nation's paper-based system. Not only because the government is such a significant contributor to this system, but because a signal by the government that "electronic is better," could be followed by the private sector.
Now before you throw your checks away, we must realize that this is not a new direction for the Federal Government. The Treasury Department's Financial Management Services have already been issuing a staggering 420 million payments electronically per year. The new legislation requires the government to double the number of electronic payments it is currently making. Such payments include Social Security, Welfare, Veterans benefits, and Federal salary checks, but exclude Federal Tax Refunds.
Obviously, many of the potential electronic payment recipients are the same consumers that are referred to as the "unbanked." Those who find it financially difficult to afford to maintain a checking account into which to deposit electronic payments.
Congress continues to discuss a mandated "minimum checking" program for poor consumers, requiring banks to grant low cost access to such consumers, described as "life line" banking services. This would create places to send electronic payments, and new check writing by consumers that currently are forced to pay by money order or cash.
Alternatively, Government officials say that such concerns might otherwise be addressed by a national electronic benefits transfer system, which would enable the "unbanked" consumers to access funds via automated teller machines and point-of-sale terminals.
To actually determine how a decline in checks would effect the current financial service marketplace, depends on which part of the marketplace your business has targeted. If you sell check stock to the government, your business will be over in three years.
On the other hand, if your business is based on the value of Personal checks, as it is in Check Guarantee, then you must realize that personal checks represent only 56% of the numbers of checks written (about 35 of 63 billion items this year) and only about 7% of the total dollar value in checks.
The Future of Checks
The demise of checks has been predicted for every one of the 20 years that I have worked in the Check Verification and Guarantee industry; however, banks will still handle 63 Billion checks this year.
Over the last few years, industry pundits have continued to herald the "Death of checks" as Debit came to the point-of-sale. Despite the growth in ATMs, direct deposit payroll, and even credit card associations issuing "Check Cards" as a plastic replacement for checks, the number of checks written in the United States has continued to grow.
Over the last five years checks have grown at an annual five percent rate (5%), and many have predicted no decline in growth before the year 2010.
As we approach the year 2000, however, changes are on the horizon. On April 26th the Clinton Administration signed into law legislation requiring nearly all federal payments to be made electronically by the year 1999.
To some, this government mandate is the last nail in the coffin of the nation's paper-based system. Not only because the government is such a significant contributor to this system, but because a signal by the government that "electronic is better," could be followed by the private sector.
Now before you throw your checks away, we must realize that this is not a new direction for the Federal Government. The Treasury Department's Financial Management Services have already been issuing a staggering 420 million payments electronically per year. The new legislation requires the government to double the number of electronic payments it is currently making. Such payments include Social Security, Welfare, Veterans benefits, and Federal salary checks, but exclude Federal Tax Refunds.
Obviously, many of the potential electronic payment recipients are the same consumers that are referred to as the "unbanked." Those who find it financially difficult to afford to maintain a checking account into which to deposit electronic payments.
Congress continues to discuss a mandated "minimum checking" program for poor consumers, requiring banks to grant low cost access to such consumers, described as "life line" banking services. This would create places to send electronic payments, and new check writing by consumers that currently are forced to pay by money order or cash.
Alternatively, Government officials say that such concerns might otherwise be addressed by a national electronic benefits transfer system, which would enable the "unbanked" consumers to access funds via automated teller machines and point-of-sale terminals.
To actually determine how a decline in checks would effect the current financial service marketplace, depends on which part of the marketplace your business has targeted. If you sell check stock to the government, your business will be over in three years.
On the other hand, if your business is based on the value of Personal checks, as it is in Check Guarantee, then you must realize that personal checks represent only 56% of the numbers of checks written (about 35 of 63 billion items this year) and only about 7% of the total dollar value in checks.
Check Guarantee has had little if any business from the segment of the check market that President Clinton just axed, although the law will clearly reduce the number of checks that banks and the federal reserve must handle.
Now further considering that of the total $3 Trillion dollars in personal checks written by consumers last year, which in and of themselves represent only 8% of the value of all checks written, only about 22% ($650 Billion) were written at the point-of-sale, and eligible for "Guarantee."
The other $2.3 Trillion were written to pay recurring bills and taxes. Considering a 100% perfect future for electronic bill payment, this check segment could well be a future area for a serious decline in checks.
Tallying this all up, we might consider the absolute demise of all non-personal checks, say 28 Billion of them, and the demise of all bill paying checks, say 17 billion checks.
Given such a magnitude, some industry pundit would then be in a position to report that checks had declined 71% (45 billion out of 63 billion) and this would still not have touched the retail Guarantee segment of the marketplace.
So, you ask, does this mean that there is really no decline in checks at the point-of-sale?
No not necessarily. The April 1996 issue of The Nilson Report (Issue 618) notes a decline of 4.3% in TeleCheck's Volume including Comdata, and a decline in Equifax Check Services of .5%. CrossCheck, Inc., reported the largest growth of the top ten players at 47%.
Given a Guarantee marketplace with less than 35% penetration, the future potential of $425 billion seems enough to stay busy for a good number of years. That is if you don't plan to take any business away from the top players.
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