Strange, but true: Checks/Cheques still matter everywhere
Worldwide checks/cheques are in decline, but just like cash there are niches where they will be used for many years and under crises the usage rebounds.
The fourth AFP Payments Guide: Not Going Anywhere: Why Checks Still Matter(1) published in March 2017 had some important key takeaways which rather contradicted the NACHA survey in May that predicted that ACH payments would pass checks in the USA by 2020:
- B2B payments by check increased to 51%, up 1 percent from 2013 to 2016. (Since AFP began its Electronic Payments Survey in 2004, check use has been in decline—until now.)
- The recent influx of high profile data breaches and business email compromise (BEC) scams may be causing some corporates and consumers to revert back to checks.
Other reasons AFP researchers found that checks are still used:
- Many systems are so old that they can only send paper checks
- Corporates can reduce some check costs by outsourcing the printing and mailing process to the bank.
Although some 60% percent of organizations experienced between one to five incidents of check fraud in 2016 (2017 AFP Payments Fraud and Control Survey), there are simple and effective ways to control check fraud as the AFP report explains:
- Standard positive pay is a highly effective control. But it is imperative that corporate treasury departments invest in payee positive pay.
- To avoid paying out more than once to a holder in due course (HIDC) check claim, corporates should always print an expiration date on the face of the check.
AFP researchers concluded that, “Simply put, checks are here to stay. While corporate treasury professionals should continue to prompt vendors and clients to move to safer and cheaper payment methods, they must take checks seriously. That means investing in the proper protections to thwart would-be fraudsters.”
In the 2008 financial crisis and the aftermath, in most countries in Europe, the usage of both cash and checks increased. Since then they have continued their decline, but will grow again in any new financial crisis. In the UK, the clearing banks decided to get rid of checks, but had to reverse the decision after a huge outcry.
1. The Research Department of the Association for Financial Professionals®, which designed and conducted the research and wrote the report, is solely responsible for its content.
CTMfile take: As we wrote in Payments Future post, “the API driven future of payment systems will still need to include cash and cheques.”
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The use of cheques in Europe varies considerably from country to country. In many countries such as Germany, Switzerland or the Scandinavian countries cheques have become extinct. There is still wide use of them in France, the U.K and some smaller countries such as Cyprua and Malta, but generally the trend is going down. This is good news as the use of cheques is both costly and has a lack of security. In a future world of instant payments cheques will have even less reason to be used.