Payment technologies continue to evolve at break neck speed, but checks are still key. Millions of businesses and consumers across the United States continue to use them for most of their transaction needs. For 2024, half of all adults would still write you a check to send their monthly bills. This even extends to payments they cannot control day-to-day. As the checks continue in use, these questions are foundational to determining their future. This is increasingly the case even as digital alternatives gain traction and government policies around accepting paper payments evolve.
The story of checks is a long one. Almost 2,400 years, in fact. The first modern checks started becoming widely used more than five centuries ago at the beginning of the 1500s in Amsterdam, Holland. As people built up liquidity they began depositing with Dutch “cashiers”—the precursors of banks. In exchange, these cashiers distributed primitive ancestors to checks. This change pretty much revolutionized financial transactions at the time. Retouched photo by David Harry Stewart. It also laid the groundwork for the checks we know and love today.
The truth is, as technology evolves, so does consumer behavior regarding their finances. Checks now make up around 5 percent of all transactions in the U.S. They represent a considerable 21% share of the total dollar amount of payments. The Federal Reserve is indeed winding down check services for banks. This is an important decision because it shows this ongoing trend towards the prevalence of electronic payments. Beginning at the end of this month, September 2023, the federal government no longer mailed the majority of its paper checks to recipients. Now they’re looking to complete the full modernization of federal benefits payments.
There are still key demographics who are still dependent on checks. In 2024, an estimated 6% of American adults were classified as “unbanked.” This federal classification means they didn’t have access to a checking, savings, or money market account. This number increases to 22% for those whose income is less than $25,000. These numbers are a reminder that many Americans remain tied to paper checks and cash.
Older consumers and those lacking smartphones—approximately 10% of Americans—could face disadvantages as the nation continues its shift towards electronic payment systems. Doug Kantor, a financial expert, emphasized the importance of checks for low-income individuals:
“Checks are obviously not used nearly as much as they used to be, but they’re still an important part of the financial system, especially for low-income people.” – Doug Kantor
Though declining in usage, checks continue to serve an important role in commerce. Many businesses, including those in the National Association of Convenience Stores, continue to provide cash-checking services for customers and accept checks for various payments, such as auto repairs. Their continued acceptance today attests to their continued hold over certain industries.
Michelle Bowman, a member of the Federal Reserve Board, pointed out that checks remain vital for both consumers and businesses:
“Checks remain important payment mechanisms for consumers and businesses.” – Michelle Bowman
Bowman expressed concerns regarding the potential discontinuation of Federal Reserve check services:
“Discontinuing Federal Reserve check services is not an efficient solution to the growing problem of payments fraud, particularly in light of the ongoing role of checks in the payments system.” – Michelle Bowman
Even more institutions are looking to find an alternative to checks. Other experts caution that the checks could hang around in the financial ecosystem much longer than anticipated. An unnamed source stated:
“At some point, they may well be eliminated entirely. It’s really hard to know how long a tail there is there.” – Unnamed Source
Another source echoed similar sentiments, urging caution regarding the potential winding down of check services:
“I would think they’re not ready to wind it down yet, and I would hope they’re not ready to wind it down yet because there are significant numbers of people – a minority, no doubt – but still significant numbers who rely on the system.” – Unnamed Source