Are checks finally becoming an obsolete form of payment? Data collected during a recent small business study commissioned by online payment company WePay Inc. suggests the nation may be much closer to a sunset of the paper check era.
The study, conducted by hired research professionals from Ipsos and Harris Interactive Inc., involved over 1,000 small business owners and 2,000 consumers. It focused on gauging today's use of paper checks between consumers and small businesses in order to "ensure that small businesses never lose a customer again because their payment options are limited," stated WePay's Chief Executive Officer, Bill Clerico.
The compiled data from the study yielded an insightful snapshot of check usage in today's small business environment. Of the businesses surveyed, 58 percent reported their customers regularly wish to use a card to buy goods. Consumers reported a 27 percent decline in usage of paper checks today - versus three years ago - and 64 percent of respondents confirmed they now write fewer than three checks per month overall.
Many consumers surveyed also said they will shop only where multiple forms of payment are offered, the 18 to 44 year olds ranking this importance slightly higher than their counterparts 45 years or older. Both groups exceeded the 50 percent buy-in mark, suggesting the overall consumer demand for noncheck payment alternatives may have reached its tipping point.
While these consumer findings aren't surprising, the upsurge of demand it places on small businesses to replace checks with other forms of payment suggests a corresponding adoption trend may be underway. NACHA - The Electronic Payments Association indicated it wants to take it one step further by urging small businesses to stop accepting paper checks because better alternatives, such as direct deposit, now exist.
A NACHA research brief released in October 2012 stated nearly 50 percent of all check-based transactions at that time involved small businesses. Half of this activity was associated with business-to-business payments between businesses and service providers. The other half was divided between inbound consumer checks and payroll activity.
In releasing the research findings, NACHA CEO and President Janet O. Estep said, "There is a significant opportunity to reduce small business check use by encouraging adoption of direct deposit via ACH [automated clearing house]. Many small businesses are unaware of the benefits of direct deposit, including time and cost savings, efficiency and convenience."
In its 2010 triennial study, The Federal Reserve also reported a steep decline in the overall usage of paper checks, going from 61 percent in 2000 to 26 percent in 2010. A 35 percent drop merely 20 years after paper check usage reached an all time high of 19 billion. The Fed has also been gradually raising paper check fees for banks and has reduced its own processing locations from 45 in 2003 to today's sole Atlanta-based facility.
The Fed will release its 2013 preliminary study findings in late 2013, no doubt shedding more light on the plight of paper checks, since all studies are pointing to an important shift in overall check usage behavior.
With widespread consumer demand for noncheck payments now reportedly tipping over the 50 percent mark, and mobile commerce adoption happening en masse, it seems only a short matter of time before small businesses will decide paper check acceptance is no longer necessary to be competitive. When that occurs, this classic instrument of commerce will take its place alongside analog payment technology and the hand-operated credit card imprinter.
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