A consumer need for convenience, increased regulation, and numerous advances in technology have all contributed to the drastic changes in check handling by the banking industry since 9/11. Prior to these changes, the only way to clear checks taken as deposits at bank branches were to physically transport them by plane, armored car or truck from the bank of deposit to the nearest Federal Reserve Branch. The checks were then sorted, and transported to the bank they were drawn on to post. The total check clearing process could take at least five business days! Writing checks is quickly becoming obsolete: almost all non-cash transactions are now done electronically through ACH, debit, and credit card transactions. In fact, in 2015, only 12% of non-cash transactions were made by check – this is a 34% decrease in check payments since 2003!

Sample Check Image

So what exactly has led to the demise of the paper check?

Let’s start with how you get paid by your employer. Gone are the days when you had to physically bring a paycheck to the bank to deposit it. Most people today get their paychecks via an ACH transaction called Direct Deposit; even Social Security and pension companies distribute monthly funds this way. ACH stands for Automated Clearing House, an electronic network enabling funds transfers between financial institutions.

And when was the last time you actually wrote a check to pay a bill or make a purchase? If you have physically written a check and mailed it recently, did you get a copy of it in your monthly statement or did it show up as an ACH debit with the check number referenced in your transaction history? These processes are a part of a federal regulation called Check 21. In October, 2004 the Check Clearing for the 21st Century Act (Check 21) was signed into Federal law. Check 21 enables banks to convert checks into electronic copies (substitute checks) for faster clearing time – eliminating the need for the physical transport of checks between banks and reducing clearing time by several business days in most cases. Not only is ACH used for direct deposit and check conversion, it is also the process that allows you to make payments for your car loan, mortgage, credit card, insurance or utility bill by phone, through your computer, or with an automatic transfer. Financial services such as Bill Payment and External Transfer continue to evolve and grow using ACH transactions, allowing you to pay your bills and other people electronically.

Although it’s involved in the processing of many transactions, ACH only accounts for about 20% of the overall non-cash transactions occurring every day. The overwhelming majority of non-cash transactions today are done with debit cards. In fact, overall debit cards usage has increased proportionately from 2003 to 2015 as check writing decreased: In 2003, only 19% of transactions were made by a debit card and by 2015 usage had increased to 48%! Debit cards have quickly replaced checks because of ease of use, convenience and worldwide acceptance. Unlike writing a check, using a debit card allows the funds to be deducted from your account immediately at the time of transaction, making it less likely to overdraw your account. Your transaction may not be approved if there aren’t sufficient funds in your account to cover it.

Innovations in technology through services such as Apple Pay, Google Pay and other wallet-type applications have made it easy for consumers to use their cards for every day transactions. Debit cards, like their credit card counterparts, are also backed by the card issuer (VISA or MasterCard), limiting your liability and increasing protection against fraudulent or unauthorized purchases. The newest EMV Chip cards have additional technology to counter the recent rise in counterfeit card activity as well.

As changes in technology continue to take place, it will be interesting to see if the trend of declining check usage continues and how other innovations may step in to replace what was once the only non-cash method of payment.






Yvette Temple

AVP, Customer Solutions Manager