For Checks, One Percent Increase Feels Like Thirty

A few weeks back we noted that a study had found that B2B payments by check actually increased by 1 percentage point from 2013 to 2016 (according to the 2016 AFP Electronic Payments Survey). Magnus Carlsson, manager of treasury and payments for the Association for Financial Professionals, took a deeper look at the significance of that one percent in a post at the AFP site.

While 1 percent might not sound like a lot, you have to understand that we’ve observed check use to be declining since 2004, back when it was at 81 percent. This survey, which was underwritten by J.P. Morgan, has run every three years and in each increment, check use has decreased substantially. The biggest drop occurred between 2010 and 2013 (17 points), so you can imagine my surprise when I saw the new data.

When you compare earlier rates of decline around 5-7% per year, aggregated over time, these data points are incredibly supportive of the check’s determination, resilience and value proposition.  The percentage of checks went from 81 to 50, and back up to 51, but it kind of feels like a surge of energy.  The check feels young again!

Other points he noticed:

  • An increase in check payments by larger organizations. Larger corporations have a multi-layer approval structure, making payment method changes ploddingly slow.
  • Payments to smaller suppliers — less integral — are also not being switched to electronic payments.
  • Organizations actually face pushback when attempting to convince customers and suppliers to accept electronic payments.

Believe it or not, there are great improvements in check processing taking place, essentially a new revolution of automation and risk reduction. Be on the lookout:

  • Next year, Electronically Created Items (ECI) are going to take eChecks to the next level. (We’ll talk about what this means in another post).  But Regulation CC moderization rules are opening the door for a major increase in the use of images for check payments!
  • Risk mitigation technologies which automatically validate checks are now available and catching interest in the industry.
  • Transaction analytics with image interrogation has improved, with improvements to counterfeits and forgeries of on-us and deposit fraud scenarios in real-time.
  • Payee Name Verification improvements are helping positive pay systems “lock down” check payments!

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