The US leads the way in cheque usage among most countries worldwide, with about 11 billion items issued according to the most recent in-depth study available. Meanwhile, in many countries, cheques simply don’t exist at all anymore.
The US leads the way in cheque usage among most countries worldwide, with about 11 billion items issued according to the most recent in-depth study available. Meanwhile, in many countries, cheques simply don’t exist at all anymore.
They are now obsolete in most countries, and international clients conducting business in the US frequently question why cheques are still in use today in the US, especially when other lower-cost, electronic alternatives like ACH transactions exits.
Why aren't most payments, aside from the most urgent and time-sensitive ones, processed via NACHA rails—the National Automated Clearing House Association responsible for ACH payments?
These transactions can now be completed as quickly as the same business day at a significantly lower cost than issuing and processing cheques.
Cheques are the most common payment method used in fraud, making up about 65% of all fraud incidents every year, including in 2023.
This information comes from the Association for Financial Professionals' (AFP) annual Payments Fraud and Control Survey, which included responses from over 500 financial experts.
Cheque usage has significantly dropped since 2021, with an annual decline rate of 7.2 percent from 2015 to 2018. This trend has intensified in recent years with the fast digital transformation occurring in the financial sector.
In 2018, consumer cheque usage accounted for just 5% of all transactions in the US, and it is declining at a much quicker pace compared to the business sector, according to the Washington Post.
Cheques are slower for businesses to issue and process, cost more, especially when all factors involved in their issuance and clearing are considered, are historically and even now much more prone to fraud and crime, and they’re also more environmentally damaging (paper requires trees) than other payment types.
Considering the initiatives to enhance the efficiency and speed of payment and receivable processes for both consumers and businesses, cheques—aside from straightforward, single payments with limited invoice details—remain a persistent barrier to digital transformation and hinder the automation or at least the acceleration and improvement of financial transaction reconciliation at every level.
One might wonder why there has not been much faster adoption among US businesses of the growing Real Time Payments channels offered by industry consortium The Clearing House (TCH) and its Federal Reserve competitor FedNow.
The increasing use of credit cards, now accounting for nearly a third of all U.S. transactions and surpassing debit cards in 2022, has contributed to the decline of paper-based payments. Additionally, payment apps like Venmo and Zelle, though still relatively minor in US citizens financial routines, saw rapid growth during the pandemic and continue to be widely used.
In 2017, cash was the dominant payment method. However, in the subsequent year, it was overtaken by the debit card. The onset of COVID-19 then made people more hesitant to meet face-to-face and exchange physical items. As a result, cash usage has significantly declined compared to five years ago.
[People were] caught off guard by the rate at which check-writing dropped off the map,” said the Atlanta Fed’s Kevin Foster, who has spent more than a decade measuring Americans’ payment habits. “We don’t want to be caught off guard the same way with cash!
- Atlanta Fed's Kevin Foster to Washington post
Instant payments are gaining popularity in the consumer market, with Zelle, CashApp, Venmo, and PayPal seeing yearly increases in transaction numbers and worth, particularly among younger age demographics in the US. Despite the numerous benefits of electronic payments, cheques continue to be utilized for specific purposes.
Utilities, rent, charitable donations, taxes and fees, gifts, and payments to building contractors are still more commonly made by cheque than other consumer obligations or transaction types. However, cheques now constitute only a small fraction of the consumer payments marketplace compared to their prominence 15 years ago.
Considering that instant payments can now be securely and efficiently be handled through electronic methods, what continues to sustain the use of those cumbersome cheques among American businesses?
The US appears unprepared for advanced international commerce expansion. American consumers lack strong and secure channels for swift data and money exchange across borders.
In this context, we might refer to the new ISO 20022 standards, which aim to standardize payments both domestically and internationally. Crucially for businesses, these standards will enable the inclusion of remittance information within the same transaction as the payment, facilitating the reconciliation of business invoices.
ebankIT as a out-of-the-box solution, ready to be implemented with financial institutions' core systems.
Financial institutions need to step up and provide seamless digital payments to their retail and business customers to meet international standards and not be left behind.
ebankIT is the key to achieve a fast digital transformation. The omnichannel platform is core-agnostic and has a modular architecture that allows financial institutions to meet the specific needs of both retail and business clients, whether through adding new features or scaling up as the institution grows.
This flexibility helps financial institutions stay competitive in a rapidly evolving digital payments landscape.
The platform provides a user-friendly experience, allowing customers to easily make instant payments through mobile devices, wearables, and internet banking. ebankIT helps financial institutions offer a fast, intuitive, and secure way to handle payments without relying on outdated methods like cheques.
ebankIT supports real-time payments through integration with various instant payment networks like SEPA (EU), Interac (Canada) and other regional payment systems. This enables clients to send and receive funds immediately, keeping pace with global trends.
ebankIT incorporates advanced security features such as customizable OTP validation, biometric authentication, Push notifications, SMS tokens, among others, to protect digital transactions from fraud, making instant payments safer.
This is crucial for building trust as institutions shift away from cheques and other slower, riskier methods of payment towards digital instant payments.
ebankIT API gateway enables financial institutions to connect with third-party services and other fintechs, facilitating faster and more flexible payment options. This also allows clients to connect multiple accounts and streamline payments across different banks.
Consider the case of HBL, a prominent Swiss bank. With the support of ebankIT, the bank has expanded its service portfolio to include innovative offerings like the QR-bill. Launched as a Switzerland-wide initiative in June 2020, this initiative aims to revolutionize traditional payment methods by introducing QR codes in place of conventional payment slips.
As most US consumers, according to the Fed studies cited, don’t use cheques at all anymore but favor electronic methods, mostly ACH and card payments, financial institutions need to be ready to offer that service.
By adopting ebankIT’s platform, financial institutions can quickly align with global standards for digital payments, offering clients the convenience, speed, and security they now expect