Will Checks Go the Way of Buggy Whips?

Checks at the End of the 20th Century and Beyond, a new book by Paul H. Green, claims that, despite an increase in the use of ATMs and electronic payment methods, there's been no corresponding decrease in check volume. It also claims the expense of paper checks is less than half that of processing payments electronically. Thus, Green thinks the demise of the paper check is a myth. Not everyone agrees.

"Processing an electronic payment costs about 23 cents per transaction vs. the 83-cent average per check. Replacing 10 percent of the annual 65 billion checks with completely electronic payments would generate a total savings of almost $4 billion," says Mary Addonizio of Mainspring Communications.

By way of example, over 1.4 million households will register with their telephone company to pay phone bills online this year, according to a study by Insight Research, a New Jersey-based market analysis firm. "Phone companies will spend only 20 cents to process an online phone bill -- $2.30 less than it costs to print, mail and process an average monthly paper bill," says Robert Rosenberg, Insight's president.

And an informal poll of financial executives says check use -- at home and at work -- is waning. Jim Suttell, director of finance operations at the Seattle Times Co., says, "We're experiencing more bankcard payments as we convert more customers to pay in advance for advertising and circulation. We can save money this way by reducing follow-up collection and bad debt costs." Further, Suttell says, "A check isn't the typical method of payment in an e-commerce transaction. I don't think checks are going to disappear in the near future, but I do see use declining as a percentage of total payment processing."

Robert Harris, CFO and vice president of finance at Advanced Network & Services in Armonk, N.Y., adds, "Just as credit cards are replacing cash, electronic payments will replace checks, not only for businesses but for individuals. Even today, I write about one-third of the checks I wrote a year ago. It's more convenient, and can be done ahead of time and scheduled. Fixed payments over fixed periods of time can be initiated at the beginning of the cycle. It saves paper forms, postage and is just as convenient to create. It may be that the overall increase in commerce is hiding the effects of electronic processing. But in my view, the handwriting is on the wall. There will continue to be a need for paper checks, but they have a limited future."