Why checks are still used by businesses and consumers

"Apple Pay will change the world," "Venmo will revolutionize how consumers split a check" and many more article headlines proclaim the impending doom of paper checks. Yet paper checks have persisted for more than 100 years, and there is still a strong case for checks in our lives. 

People think the rate of decline in check usage is increasing exponentially, when in reality, it’s stayed fairly consistent according to our research. Part of this is that checks are evolving. To make them safer than ever, Deluxe has added extra check security features like a security square that can't be copied by printers and personalized MicroPrint. And although payment methods, such as PayPal and Venmo, have disrupted the industry, research shows that checks aren't declining at the speed they were around the early 2010s.

Although there are certainly new technologies that drive down check usage, checks will always have a place in the payments landscape. 

The era of writing a check to pay for groceries or clothes is long past. That's why emerging mobile payments (like Apple Pay) are more likely to impact credit and debit cards for point-of-sale (POS) transactions — these cards have already ousted checks from dominance.

When are checks still used?

Checks reign supreme in other ways. Here are three of them:

1. Businesses pay other businesses

From an unwillingness to pay credit card usage fees to a desire for a paper trail, businesses favor checks when making payments to other businesses. Checks offer many advantages for businesses — especially small ones. According to Forbes, small and midsize companies (SMBs) write eight times as many checks as their retail customers. 

Biz2Credit analyzed the bank statements of more than 18,000 companies across multiple industries. The study covered 2.2 million expense transactions totaling $2.8 billion made by firms that uploaded primary data onto the online small business finance marketplace.

“Many times, [SMBs] use checks as a way of controlling cash flow,” said Venkatesh Bala, PhD, who conducted the study. “Issuing checks provides a built-in delay in the payment of vendors and employees, whereas online transfers and direct deposits move the money directly into other bank accounts immediately.”

The study found that check issuance increased as the size of a business increased. Companies with less than $250K in annual revenue issued 133 checks per year on average, while firms with more than $5M in revenue issued more than 1,100 per year on average, or roughly 4.4 checks each business day.

2. Consumers send check payments to businesses

Consumer to business (C2B) payments account for a large portion of checks written in the U.S. every year. Here's why:

• Some businesses still don’t accept online or mobile payments and prefer checks
• Some consumers lack credit cards, debit cards or mobile phones

For these people and in these circumstances, checks remain one of the only viable options, along with cash and reloadable cards. According to the Federal Reserve's check data, commercial checks are valued at $33.8 billion dollars per day, the highest value since 2009. 

3. Consumers pay one another with checks

While we’re hearing a lot lately about the rise of peer to peer (P2P) payment options, the fact remains that consumers, when paying each other, sometimes prefer checks. Here's why:

• They’re convenient — particularly when paying another individual
• They offer more security features than cash
• Consumers can stop payment on a check

Times when paying with checks are especially handy might be: Paying a friend for a fixed service, sending a check to school to pay for a child's athletic equipment or giving a check to a friend you're renting from.

What does all this mean for financial institutions? Continue to support your check programs. 

Checks are likely to remain a viable stream of revenue for FIs — both in terms of fees and account holder profitability — for the foreseeable future.

The information provided in this blog does not, and is not intended to, constitute legal or financial advice.