Checks, money transfer orders transcribed on a sheet of paper, have been a part of the banking industry since antiquity. Of course, when you needed to pay your landlord in gold bullion or pay off your chariot loan in brass coins, using these lightweight sheets of paper made sense.
However, with various types of digital payments now a swipe away, paper checks hardly seem like payment’s best hope. “The future of checks is bleak,” says Bill Winterberg, founder of FPPad, a financial technology publication for financial professionals. “Many of the shortcomings of paper checks, like the potential for forgery, account information theft, the ease of losing or misplacing paper, delays in processing paper, are addressed and improved by electronic payment gateways.”
Winterberg isn’t alone in his eulogization of checks. A study published by the Federal Reserve in 2007 showed a steady decline in check payment and writing between 2003 to 2006. More recently, a 2012 white paper published by Digital Check found that Americans write only about a third as many checks as they did 20 years ago, and even suggested the year 2030 as a tentative expiration date for checks.
If checks are headed towards extinction, why did USAA launch a new mobile app in July 2016 that enables visually impaired users to deposit checks with their smartphones? The fact is, the reports of checks’ death have been greatly exaggerated. “While members are using checks less and less often each year, our Deposit@Mobile function is the most popular way to deposit a check among our members,” said Prianka Advani, assistant vice president of USAA Bank.
USAA, which provides banking, insurance, and investment services to military personnel and their families, was an early leader in the remote deposit of checks, introducing Deposit@Mobile video capture technology to the market back in 2010. The bank’s mobile check app has over 1 million unique users, and through October 2015, had processed more than 9 billion transactions. Not bad for a dead payment option.
Deposit@Mobile’s technology certainly makes check transactions more accessible. The latest version enables members to deposit up to 10 checks in the same session to different USAA accounts. Still, if USAA sees members do most of their day-to-day banking on USAA and the mobile app, why continue to invest in check tech?
“We are committed to being there for our members no matter how the trends in money movement shift,” said Advani. “Currently, processing checks is still a need that our members have.” USAA stays on top of customer trends by listening to its employees and providing an atmosphere where ideas can grow into innovations for its members.
The idea to add voice-guided technology to the bank’s existing Deposit@Mobile capability, for example, came from a software developer who acts as an accessibility advocate. She submitted the suggestion through an internal innovation contest held annually at USAA.
Still, USAA isn’t living in denial. It’s witnessed a growth in digital payment types across the board, which is why alongside its constant improvement of check tech, the financial institution is focusing on other money movement options including person-to-person payments, real-time payments and digital payments.
The problem is that banks are in an uncomfortable limbo when it comes to checks. Like cash, checks are set to fade from existence. However, its successors, digital payments, haven’t quite come into their own yet.
“It seems inevitable that the ongoing rise of digital payments will slowly but surely lead to the end of paper checks,” explained Michael Kitces, publisher of Nerd’s Eye View and partner at Pinnacle Advisory Group. “The mechanism, however, remains unclear.”
Kitces envisions a number of different digital alternatives replacing checks, including direct ACH transfers facilitated by banks, smartphones as ACH-driven payment devices, or ACH functionality facilitated from a blockchain by a third-party intermediate.
“Simply put,” said Kitces, “the fact that checks may be on their way out for something ‘digital’ doesn’t mean we know what that digital medium will be. Yet.”
Until then, banks will have to keep a close watch on present trends to give customers what they want. Right now, they still want checks.