Check Processing...The Market

Use of paper checks for personal and business payments has grown steadily for more than 125 years and our research suggests that it will continue to grow for at least another 25 years. The paper check payment system continues to function very well and there is no basis for anticipating a checkless society, as predicted by bankers in the early 1970s, even by the year 2050.

According to the National Organization of Clearing Houses (NOCH), "...the check still represents an extremely safe and efficient payment instrument that continues to enjoy widespread and heavy usage. " Primary Payment Systems, a major consortium of banks and electronic funds transfer associations, places the check mechanism peaking in the year 2021, "with checks continuing to be consumers' preferred method of payment." in the 1997 Findings and Recommendations, NOCH reports, "Processing conventions, technology, clearing options, and the law governing the check payment system have experienced significant development through the years, and today the check remains as one of the primary means of payment in the United States and internationally." For more than two decades the banking industry has been trying to eliminate the paper check in favor of an electronic payment system. Banks are clearly improving the speed and security of check handling through electronic presentment strategies and bank automation, while hundreds of paperless pilot programs continue to explore new technology, strengthening the banking system's ability to achieve electronic settlement. "Electronic check presentment, image technology, and bank-to-customer information links offer promising advancements that will ensure the continued life of the check as a primary means of payment well into the next century." While the Federal Reserve Board announced in 1971 that it intended to move toward an electronic system, the number of paper checks has continued to increase instead of decline.

In the 1970s the number of paper checks was growing at an 8% annual level, which out paced both the growth of the population and that of the economy. In the 1980s check growth slowed to a 6% annual rate, and in the 1990s the growth rate is approximately 3.6%, and is projected by the NOCH to grow at an annual rate greater than 1% into the next century, and by our research to grow at a 2% level through 2005, with the dollar volume growth continuing to out pace transaction growth.

In addition to reporting U.S. check growth over the last decade and forecasting check growth into the year 2005, our research has also determined that the segmentation of checks has remained relatively constant over the last decade.


Who Writes Checks?

Payer		% of all checks
Business		40%
Individual		55%
Government		5%
TOTAL		100%

Respected organizations have produced reports and research papers for various purposes; each based on what is hoped to be a representative sample of consumers or retailers. As an example, Chain Store Age and Leo J. Shapiro & Associates combined two research studies from retailers and 1,000 consumers nationwide to form the basis of their 1999 Survey of Retail Payment Systems.

All available research continues to reflect the fact that checks continue to be a significant part of the overall payment system, representing over 20% of retail sales. The 1999 Survey of Retail Payment Systems found that checks were cited as the second ranked payment method used, right behind cash. The top reasons that consumers prefer checks, according to the survey, are: "don't like to carry cash" and "easier record-keeping".

Research has shown that check use is increasing, checks are a preferred method of payment, and the potential to manage check risk has not been realized.

By the year 2005, the number of checks written will increase 20%. The value of those checks represents a 35% increase over the value of checks written in 1998. This is due, in part, to the fact that banks are continually improving the safety and security of check handling and the fact that checks are still second only to cash as consumers' preferred method of payment.

Presently, half of all checks processed are written by individuals to businesses. In fact, checks reflect 21% of all retail sales and studies show that consumers prefer to use checks even more than they currently do. Research shows that 84% of consumers expect their check use to stay the same or increase in the future.

To submit a merchant account application to Next Day Funding, please Click Here.