Universal Acceptance Holding Digital Payments Back
- Check volumes are falling, but check fraud hit $21 billion in 2023—a gap banks can no longer ignore
- Abruptly eliminating checks isn't an option — critical payment workflows still depend on them
- OrboGraph equips banks to fight check fraud now while preparing for a digital-first future
A recent American Banker opinion piece argues that the U.S. is entering the decisive phase of its shift from paper checks to digital payments — and that the way this transition is managed will directly affect fraud exposure, operational risk, and customer trust for years to come.
For bank fraud and operations executives, the core message is stark: check volumes are steadily declining, yet check fraud is accelerating, reaching an estimated $21 billion in losses in 2023 alone — an imbalance that author Cameron Fowler calls "unsustainable." Every additional day the industry relies on checks, the system bears unnecessary cost, friction, and fraud risk that could otherwise be removed from the ecosystem.
At the same time, checks still anchor key workflows in B2B payments, government disbursements, and lagging-adoption communities, so simply “turning off” check infrastructure would create new operational pain points and access gaps.
Digital Payments are an Alternative, NOT a Replacement
Mr. Fowler notes that "the alternative is already here" and that "digital payments can and must fully meet those needs." However, without adoption across all FIs AND consumers, legacy payments such as checks and cash will still persist -- making them just an alternative payment, not a replacement.
As we recently noted in several articles, for widespread adoption of digital payments, the path forward requires operational readiness—not just new standards and guidelines, but real solutions that enable both sending and receiving digital payments efficiently and securely. More importantly, if one side wants to use digital payments but the other is does not accept that payment channel, then the fallback will continue to be checks. This is true for B2B, B2C, and even P2P where we explain that when two people don’t share the same payment app, the simplest fallback is often a mailed check.
Additionally, while Mr. Fowler argues that the FED seeking to eliminate check clearing service is an opportunity for the industry, many in the industry have pushed back -- even from their own Vice Chair of Supervision Michelle W Bowman:
I cannot support the Request for Information and Comment on the Future of the Federal Reserve Banks' Check Services (Check Services RFI). The Check Services RFI seems to favor the discontinuation of check services by Reserve Banks, even while checks remain an important payment mechanism. The materials note that in 2021, about 11 billion checks were written, and while they accounted for approximately 5 percent of the overall noncash payments, they represented about 21 percent of noncash payments value. Checks remain important payment mechanisms for consumers and businesses.
Optimization of Check Payments Rather than Eliminate
The idea of eliminating paper checks has been around longer than most individuals careers in the banking industry. And, while volumes have declined, checks still represent a major portion of noncash payments. Rather than continue to push the narrative, the goal for the industry should be optimizing the payment channel and ensuring that payments are secure.
We already have the technologies to read and extract data with accuracy and read rates over 99% -- achieving the straight-through-processing that effectively streamlines the payment. However, many financial institutions continue to leverage legacy OCR technologies. Additionally, their are solutions available right now that can achieve of 95% detection rates on on-us and deposit check fraud. However, many financial institutions continue to leverage legacy OCR technologies for check processing and rules-based systems check fraud detection -- leading to inefficiencies and major losses.
So, the tools are readily available for financial institutions to both optimize and secure check payments. Does it make more sense to eliminate the payment channel -- causing frustration from consumers and corporations, or to optimize and secure the payment channel that millions continue to utilize?