By Eric Kennedy, Payments Product Manager at Apiture
For years, we’ve heard that checks are obsolete, but year after year, consumers continue to write checks for rent, birthday gifts, and bills. Surely our industry has made enough gains in technological infrastructure for checks to finally go away. In today’s world fraught with cybersecurity issues and risk, are people really OK with a piece of paper with their account number and bank routing number floating around?
It’s easy to make assumptions that check payments are declining, but after years of talking about checks disappearing, we are finally seeing some traction in the market. Bank of America released its 2021 payments data and reported for the first time in the bank’s history, Zelle® payments surpassed the number of written checks. The study found cash and check payment activity was down 7% year-over-year as clients move to digital payment methods. Payments sent using Zelle® surpassed checks written by users in 2021 and are 20% higher in January 2022.
This is big news! And, given that the data is from one of the largest financial institutions in the U.S., it likely reflects the overall trend in this country.
So what is spurring this change? Why are check and cash payments declining? Consumers’ expectations for instant gratification in all areas of their lives, including payments, are likely at play, and a real-time payment option from a trusted financial institution is an ideal solution.
Instead of collecting rent checks, landlords now accept Zelle® payments into their business accounts. Grandparents send money via Zelle® for their grandchildren’s birthdays instead of sending a paper check. Friends who dine out and want to split a check are choosing to split money via Zelle® instead of exchanging cash and withdrawing funds at an ATM.
The great thing about this shift in payments is that it benefits everyone. Banks and credit unions can reduce operational costs, consumers can easily send each other money, and small businesses don’t need to wait for checks to clear to keep their business operational. This trend is exciting, and I fully anticipate it to continue.