GS Logo
The Green Sheet, Inc

Please Log in

A Thing

Links Related
to this Story:

On Life Support, Paper Checks Making Valiant Effort

By Steve Eazell

Well it's over: The check is dead. It bit the dust, headed to that great clearinghouse in the sky, kicked the bucket. It's gone, finis, finito, no m_s.

The final paper check in America has officially been written. Although I'm not sure who gets to claim the distinction of submitting that last one, we all know it happened, right?

Hold on a minute: If the check's not dead, it's definitely on life support.

Even the federal government recognizes that the delivery mechanisms we have in place for clearing these silly things has become ridiculous. The Check Clearing for the 21st Century Act, or Check 21 for short, was just signed into law, highlighting this fact. We all agree that this will literally do away with the paper check altogether, don't we?

We all know the only people writing checks today are little old ladies, identity thieves, check-kiters and forgers. The rest of us stopped writing checks years ago, so it only stands to reason that the check has either taken its last breath or is in the Intensive Care Unit.

Because the Check 21 initiative in effect signed the 'Do Not Resuscitate' order, I say we pull the plug on those archaic relics of 18th century technology and embrace the cashless society that everyone has been talking about and waiting for.

Let's just ignore the fact that the passing of Check 21 acknowledges that we really are still writing a lot of checks. Pay no attention to the fact that two of the largest electronic payment companies, Visa and STAR (owned by First Data Corp.) have each implemented elaborate systems to process paper checks and convert them into EFTs.

Most importantly, let's also ignore the fact that following cash, the paper check, with all of its antique and manual methods of delivery, is still the easiest form of payment to accept. If I write you a check, you don't even need a bank account to cash it.

If you're a business owner and I write a check to the business, you still don't need anything more than your own bank account to cash it-you don't need a merchant account or to be sponsored by an ATM network. The funds for that check will probably be available in one to two days.

Perhaps we haven't seen the last check after all. Maybe us high-brow electronic payment types assumed incorrectly that all of the more efficient alternatives on the market today brought about the demise of that archaic payment mechanism.

I am here to tell you that we should wait on getting out our black funeral wear; instead, we should look at what is happening to the check and what the future holds for it. I am not saying that Americans have slowed down, much less ceased, writing paper checks on a regular basis. Today we have debit and credit cards, electronic bill payments, recurring ACH and ARC lockboxes. I write very few checks, and I know that you do, too; however, there is a veritable slew of Americans who continues to do so.

The Federal Reserve Board reports that businesses and consumers in the United States wrote approximately 42.5 billion checks in 2000.

This figure was included in a study conducted in 2002 polling banks and credit unions on their check data. There is no way for the Fed to track precisely how many checks were actually processed; one reason, for example, is that financial institutions such as smaller independent banks and credit unions do not want to share their numbers because they are member-based organizations.

However, while it is important to note that the Fed is not entirely certain when check usage peaked, it estimates that check usage began to decline sometime in the late 1990s.

In my opinion, we are headed toward a new and different phase in the world of checks, and it's a direction to which you should pay careful attention. In reality, check writing is only moderately on the decline, and this is a powerful point. Since those of us who have stopped writing checks are no longer included in the staggering numbers that I mentioned here, who is still writing them?

Could it be there are people who would like to continue taking advantage of that last remaining right called 'float' (and remember, float is an American right)? Do check writers like knowing where each and every penny goes?

Could it be that supporters of those relics of antiquity, those naysayers of progress, simply do not want to change the way they make payments?

We are presented with interesting new developments in the payments front, including:

  • The Check 21 initiative
  • New electronic services that offer real-time check holds such as Visa's POS Check and STAR CHEK Direct
  • The rising expense of credit/debit card acceptance to merchants
What does this mean to retailers and consumers? Retailers will certainly benefit from the check initiatives, but I believe these will not be the panacea most purport them to be.

Until somebody shakes the trees, Visa POS Check and STAR CHEK Direct will probably service only about 50% of U.S. checking accounts because of decisions made by the banks, credit unions and savings institutions.

Retailers will benefit only if they are supported by third parties guaranteeing checks when they are declined for lack of funds; this will drive up the cost of check acceptance without guarantee.

Problems for consumers will arise when checks are declined because of lack of current funds (for example, when the customer's deposit has not yet posted to the account). When consumers have negative experiences, they search for alternative payment methods.

Check 21 will not really have an impact on merchants or consumers, but there will eventually be less float for those consumers who need it most. If that particular portion of the population evolves into a riskier group of individuals stretching float, not qualifying for credit or becoming crooks, there will be more risk involved for merchants.

We can all agree that the cost of processing credit and debit cards has skyrocketed recently. I don't think it takes the wisdom of the imperial wizard to figure out that retailers are not happy about this. This factor alone might affect check usage one way or the other; checks could become the low-cost darling of payments.

It is imperative that we remain vigilant in our efforts to keep our offerings to merchants current-after all, they pay the freight for what we call profits. Payment card acceptance is not what it used to be, and if we do not evolve, we will perish.

I submit for your consideration that we need to offer the right services to our merchants. If you are not aware of value-added services including check guarantee, check conversion, Visa POS Check, STAR CHEK Direct, gift and loyalty cards, time and attendance, and check verification, you are doing your merchants a disservice but you are also leaving those accounts wide open for the competition.

Steve Eazell, a 15-year veteran of the payments industry, is the Director, National Sales and Marketing for San Diego-based Secure Payment Systems, Inc. (SPS), a national provider of value-added services, including electronic check and stored-value gift card services. For more about SPS, visit, or e-mail

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
Back Next Index © 2004, The Green Sheet, Inc.