Fiserv: Paper Checks Still in Play, Banks Should Take Advantage

May 25, 2018         By: Steven Anderson

How many times have you heard that the paper check is going out? With online bill payments and automatic recurring debit options, it’s easy to see why some may find the arcane art of filling out a paper check to be a dying art at best. New word from Fiserv, though, suggests that the paper check may have more life in it than expected, and that banks should be—and in some cases are—acting accordingly.

Perhaps the biggest advance in mobile payments since cash, the paper check has been on the decline in recent years. The Federal Reserve notes that commercial check use was down 1.7 percent in 2017 as compared to the figures in 2016. However, even as use was down, value was up; the average paper check value increased 4.3 percent in that same time frame.

Checks are increasingly considered distasteful, especially at a small business level. Checks take cash just to cash, and even when just deposited, the funds aren’t immediately available. Sometimes the checks are even proven to be bad later on, which requires the small business to go on a voyage of suffering through various banking bureaucracies, trying to clear up the matter.

This represents an excellent opportunity for banks to step in and fill in some of the perceived gaps, like making funds available immediately and using their own bureaucracy to wind through other banks’ bureaucracies in the event of a bad check. It’s a clever enough idea; stop treating the customer like he or she is directly responsible for the checks brought in and instead accept the check as pure, then follow up with the check’s issuer if it turns out otherwise.

Banks haven’t always exactly accepted checks with good grace. To this day, even small credit unions will require customers to have enough money on deposit with them to make good any check issued, and force the customer to run the gauntlet to fix problems. If banks were to modify this approach—take the check and the responsibility should it go wrong—it would likely step up check business. Considering how many checks are still in use, this isn’t a bad strategy.