It’s no secret that checks aren’t as common as they used to be. As the range of ways in which consumers and organizations make payments has expanded, the old-fashioned check seems to have become the most likely candidate for obsolescence.
However, despite the predictions of some industry experts, checks remain very much a part of the payments mix. There are some important reasons for this, one of which is that they are still regularly used by many small businesses and charities.
There have also been systems adopted in markets like the UK and Canada that allow images of checks to be captured the moment they are deposited.
In the UK, the Cheque and Credit Clearing Company (C&CCC) has said that checks will remain “a key part of the payments landscape”, partly because of plans to introduce a new image-based clearing system that will reduce check clearing time from six weekdays to the next weekday.
Given the ongoing importance of diversity and choice not only in payments, but across financial services as a whole, should financial institutions be working to raise awareness of services such as check imaging?
Awareness improving, but still more to do
According to recent market research by C&CCC, awareness of the UK’s forthcoming image-based check clearing system is improving, but those organizations and individuals that know about it are still in the minority.
Three in ten charities surveyed in April 2017 were aware of the impending introduction of check imaging, up from 23 percent a year earlier. Among consumers and businesses, however, awareness levels remained fairly static, at 15 percent and 20 percent respectively.
The new system will be rolled out gradually from October 30th 2017, with a target of full implementation sometime in the second half of 2018. During this integration period, two clearing systems will operate in parallel. This means some consumers and businesses will see their checks clear by the end of the next weekday via the imaging process, while others will continue to go through the existing, paper-based system based on a six-weekday timescale.
James Radford, chief executive officer of C&CCC, said: “Although the findings from our research indicate that awareness levels of check imaging are highest amongst businesses and charities, it is important that all organisations such as these – that write or receive checks – speak to their bank or building society if they want to find out more.”
It’s not just in the UK that checks continue to play a significant role in the payments ecosystem. According to the Federal Reserve, there were 17.3 billion check payments in the US in 2015, with a total value of $26.83 trillion. The value of check payments was behind only Automated Clearing House transfers, and significantly ahead of debit and credit card transactions combined.
While check payments dropped by 4.4 percent in number and 0.5 percent in value between 2012 and 2015, the decline was slower than in earlier periods since 2003.
Benefits for banks
Difficult as it might seem to justify investment in a payment channel that is shrinking gradually, there are benefits for FIs to gain from adopting innovative solutions for regular users of checks.
Processes such as mobile deposit – which allows the user to deposit checks on the go by capturing an image with their smartphone or tablet – can help to move customer activity away from the branch and into less costly digital channels. Furthermore, it contributes to maximum simplicity and convenience for the customer, saving them the time of a trip to the branch and the potential security risk of physically transporting checks.
Business clients might prefer to complete remote deposits using scanners that transmit images of checks to their bank’s back office for processing. Desktop and mobile remote deposit capture boost convenience for corporate clients by allowing them to make deposits wherever their business happens, at whatever time suits them. Secure deposit and audit trails provide an additional advantage.
In cases where customers prefer to deposit their checks in person at a branch, tools such as a desktop scanner allow tellers to capture images of items at the point of acceptance, making a valuable contribution to speed and efficiency.
Essentially, it comes down to banks making the necessary investment and taking action to ensure that customers who still rely on checks are able to use them with maximum ease and flexibility.
At a time when so much innovation is taking place in areas like mobile banking and contactless payments, the trusty check shouldn’t be forgotten.
Image credit: iStock/pjmorley