Yes

by Simon Wright

Created on: July 14, 2009

The use of checks/cheques has been diminishing to such an extent that some banking commentators have predicted that they may become extinct in the next decade. This rapid decline in usage of checks coincides with the rise in electronic forms of money transfer and payment. Let's look then at why consumers are increasingly favoring electronic money transfers over checks.

Speed:

There are times when you want or need the money to reach the destination account speedily. However, if you are forced to post a check, then it's likely to be two or three days before the check arrives with the other person. And then they have to lodge the check with their bank and go through the check clearing cycle.

In comparison, by logging into online banking, you can effect an online money transfer that should arrive in the destination account in near real time.

Convenience:

For occasions when I need to send a check, I have to write out the payment details and then have to trek to my nearest post box to send the check off. This may mean braving inclement conditions, which can be especially difficult for elderly people or people with mobility restrictions. Indeed, it may also prove inconvenient for parents who have young children who can't be left unsupervised in the house.

In contrast, an electronic transfer can be made from the comfort of your home, at any time of day. If you have made a payment to the same person previously, the chances are that their details will have been saved meaning that you don't have to re-key all the payment information. With the emergence of mobile banking functionality, it will also soon be commonplace to make money transfers by mobile phone, meaning that you don't even need to have access to a computer to send that payment off.

Confidence in payment reaching recipient:

Checks have the potential to go missing in the post or to be mislaid at the bank's check processing centre. In contrast, electronic payments have a much higher success rate and you should get near instant confirmation that the funds have left your account.

Surety of knowing when your money will leave your account:

A major frustration with checks is that you never know, with certainty, when the money will come out of your account. It will depend upon the speed of the postal service, how quickly the receiving party lodges the check, and how quickly the receiving bank processes it. That all adds up to quite a lot of uncertainty. Meanwhile money will be coming in and going out of your account and you have to be careful to have enough funds to cover the check when it does finally come out of your account. The risk of incurring unauthorized overdraft fees is therefore much higher than with an electronic money transfer.

More environmentally friendly:

People increasingly are becoming environmentally aware. We have switched off our paper bank statements in favor of electronic statements and store documents electronically rather than in paper format. This green motivation perhaps plays a secondary role in the inexorable transition from checks to electronic payments but nevertheless is a nice additional benefit.

Summary:

These factors of speed, convenience, and greater dependability explain why the world has seen a massive growth in the usage of electronic payments at the expense of checks. It has correlations with the switch that people have made from sending letters to sending e-mails. It is likely that checks will continue to be available for the foreseeable future, as banks and retailers won't want to exclude people who haven't yet taken up online banking or mobile banking services. However, the likelihood is that we are probably one of the last generations that will use checks.

Sources:

http://news.bbc.co.u k/1/hi/business/8119 346.stm

Learn more about this author, Simon Wright.
Click here to send this author comments or questions.