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Flash forward: today it's pretty For example, the group said, regulations could be changed
much all about digital to allow FIs to place exception holds on check deposits
specifically when a fraud or scam is suspected.
That was then. Today, check writing has become far less
common for consumers, who increasingly rely on credit Checks continue to dominate certain sectors
and debit cards and digital wallets for both online and in-
store payments. Many business sectors still receive high volumes of checks,
Schwabline noted, particularly utilities, healthcare,
Digital wallet adoption is soaring. According to research municipalities, property management and insurance.
by PYMNTS.com, as many as 77 percent of consumers A significant share of those payments are business-to-
have used a digital wallet; usage is even higher among business transactions.
younger consumers (84 percent of Generation Z and 81
percent of millennials). Chain Store Age reported that 37 Powers agreed, stating, "We barely do any retail anymore,"
percent of mobile wallet users have stopped shopping at he said of CrossCheck. Retailers that accept checks and
a retailer that did not accept digital payments. According use check authorization and guarantee services are selling
to PYMNTS.com's data ,digital wallets are expected to large-ticket items, like furniture stores, where items sold
exceed 30 percent of in-store transactions by 2030. cost $500 or more. CrossCheck's biggest market is car
dealerships. "We're seeing no decrease in checks there,"
But none of this is to suggest checks are obsolete. In 2021, said Powers. Often, CrossCheck's clients use the company's
approximately 11 billion checks were written, accounting mobile app to capture pictures and create remote deposits
for approximately 5 percent of overall noncash payments, of those checks.
according to the Federal Reserve. Those 11 billion checks
represented about 21 percent of the value of noncash Interestingly, financial technology firms are one of the
payments. sectors that you would least expect to receive checks, but
they do, Schwabline pointed out. "These are organizations
"Checks remain important payment mechanisms for that don't know how to handle checks." That's because, for
consumers and businesses," Michelle Bowman, vice chair obvious reasons, they are all about digital.
of the Federal Reserve Board said in a statement. "Fraud is
a critical issue in the U.S. payments system that warrants Another factor may be that many of these firms are
ongoing attention." To that end, the federal bank regulatory being run by younger professionals. Individuals 30 and
agencies last June requested public comment on how the younger feel much more comfortable with digital forms
agencies could best address payments and check fraud. of payments; many don't even write checks, Powers noted.
Still, checks have longevity. "Check usage will decline,
"Even though checks are an increasingly rare form of but [usage] will continue long past our lifetimes," Powers
payment U.S. merchants must devote disproportionate predicted.
resources to detecting and preventing check fraud," the
Merchant Advisory Group wrote in its comment letter. So, the question isn't whether checks belong in a
"Check fraud tends to be more sophisticated, and therefore modern payments strategy, but how to keep them from
harder to detect, than other forms of payment fraud. As a slowing down treasury management functions like cash
result, check fraud remains one of the most persistent and application, reconciliation and reporting, as well as bank
costly forms of fraud in the payment sector." handling, Schwabline said.

"Check fraud has surged in recent years, driven by mail- Modern lockbox processing addresses this by digitizing
system vulnerabilities, widespread availability of check- checks and remittance data the moment the items arrive in
washing tools, and criminals' focus on exploiting this a processing center and combining that information with
antiquated payment method," the Bank Policy Institute the natively digital remittance and payment information
told regulators. "The surge in check fraud has left banks so that everything is in a single, electronic stream. "Better
with high volumes of claims and disputes, exposing the than 60 percent of the new deals we're getting are with
limits of outdated legal and operational processes, creating people wanting to see everything in one spot," Schwabline
delays for customers and disproportionate burdens for said.
small financial institutions lacking the resources to absorb
rising losses or manage complex disputes." The challenge is no longer whether checks will fade but
how to manage them more securely while they persist.
The BPI continued, "Absent a wholesale restructuring of
the check collection process...the regulatory framework Patti Murphy is senior editor at The Green Sheet, president of ProScribes
for check collections and funds availability requires Ink (www.proscribes.net) and self-described payments maven of the
enhancement to provide clarity as to parties' rights and fourth estate. Her Today in Payments reports are a regular feature of the
obligations, streamline interbank dispute resolution Merchant Sales Podcast.
processes, and facilitate fraud risk management and
prevention."
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