The End of Paper Checks? Clues from Across the Pond
People often ask me, “Hey Mike, when do you think checks will disappear as a form of payment?” This is a good question; not just because companies like mine are focused on helping other companies Leave the Check Behind, but because checks are costly; they consume natural resources; they are subject to fraud; and they are the most inefficient form of payment available. And it’s not just companies that print a lot of checks. A large number of consumer to consumer and consumer to business payments are still transacted by check. Many times, this question comes with a qualifier; generally something like: “Will it take government intervention?”“Do the banks need to band together to end checks?” I think we can look to the UK for some clues.
The UK found checks “cheques” over there so abhorrent that at the end of 2009, the UK Payments Council, a banking industry body, declared that cheques would be phased out of the UK payment system by October 2018. See the article: (http://news.bbc.co.uk/2/hi/business/8414341.stm). It’s important, however, to pay attention to the second part of the statement which reads, “but only if adequate alternatives are developed.” Well, guess what? Last month, the UK Payments Council declared that cheques will continue to play a role in the UK payment system “as needed.” See the article: (http://www.bbc.co.uk/news/business-14122129).
So if the assembly of banks didn’t eradicate checks, will it take government? What will it take? The answer, in my opinion, is innovation. The reason the UK initiative failed is because no adequate alternatives were developed. We need to think beyond ACH, Wire and Card payments in reducing paper check dependency. There needs to be true innovation.
Currently, there is a flurry of innovation in Consumer to Consumer, or what is more often referred to as Peer to Peer electronic accounts and payments. Consumers represent a huge market that depends primarily on an antiquated form of monetary settlement: the bank account and the check. The economies of scale that can be gained by solving problems for the consumer market are staggering. Facebook, Google, eBay and others have waded heavily into this space in order to drive consumer payment innovation. And I expect new payment vehicles to arise over the next 3-5 years out of these efforts which will translate into significant opportunities and efficiencies for businesses.
So let’s cheer on innovators as they continue to innovate. It’s the only way we’ll eventually leave the check behind.
As always, I’m interested in your thoughts.
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