R.I.P. personal bank checks
It is entirely likely that we will witness the death of the physical bank check within the next 10 years and perhaps sooner.
It's already happening in Europe, as Andrew Kahr relates in a guest column for American Banker. Kahr's recent attempt to order new checks from his bank in Switzerland, where he lives and works, met with this reply: "There will be no more checks. You can use electronic payments, or cards."
As Kahr observes, Europeans have been moving away from checks for years. In fact, many banks no longer even refer to "checking accounts." Kahr's is called a "current account."
European trends tend to cross the pond with regularity; witness Italian coffee drinks, wafer-thin fashion models and "American Idol."
In the banking space, the Europeans beat us to widespread deployment of smart credit cards, mobile payments, hand-held payment terminals and RFID payment technologies, so there's precedent.
Our payment methods continue their rapid migration from checking to electronic, thanks in large part to the widespread adoption of debit cards. Credit, debit and electronic payments now account for three-quarters of all non-cash payments in the United States, with checks down to about 20%, according to the Fed.
Today's rapidly expanding world of smartphone apps and person-to-person (P2P) payments will only hasten the demise of check writing.
The question is, are American banks ready -- or willing -- to cancel our checks?
As Kahr points out, banks have a sort of entrenched love-hate relationship with paper checks.
What they love about them is overdraft fees, made even more attractive now that financial reforms have clamped down on the fees and penalties banks can charge on electronic transactions. What they hate about checks is the cost to process them.
Will banks, one day soon, conclude that it's time to pull the plug on checks since volume continues to drop and, presumably, the remaining check writers are an older, more stable clientele that is less likely to generate the overdraft fees that make checks profitable?
Or, given the hostility consumers feel toward financial institutions these days, will they keep pumping out the paper checks for fear that to discontinue a legacy program at the same time they're imposing new fee structures would be adding insult to injury?
My prediction? Personal checks will be as obsolete as vinyl records and cassette tapes by the end of this decade and probably sooner.
By then, Mom will know how to send that birthday cash to your smartphone.
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