Checks may be getting an extended life now that financial institutions are developing and rolling out mobile remote-deposit capture technology as part of their mobile-banking applications, observers say.
Last month, JPMorgan Chase & Co. became the first major U.S. financial institution to offer mobile remote-deposit capture (see story). The technology enables customers to deposit checks into their accounts using images captured with cameras on their smart phones. USAA Federal Savings Bank earlier rolled out a similar service (see story).
Growing interest in the technology has sparked a debate over whether it might help stall the rapid decline in check use.
“Check volume is declining, but why would it decline if [banks] make it really easy to deposit” checks, says Nicole Sturgill, research director for delivery channels at TowerGroup, a Needham, Mass.-based consultancy unit of Corporate Executive Board Co.
The latest Federal Reserve data suggest the number of checks paid decreased 6.4% per year between 2003 and 2006, for a total decrease of 6.7 billions checks, from 37.3 billion to 30.6 billion.
The number of checks paid differs from the number of checks written because billers and merchants increasingly use the automated clearinghouse system to convert checks into electronic payments. The number of check written slipped 4.1% per year for a total decrease of 4.5 billion, from 37.6 billion to 33.1 billion, the Fed data show.
The Fed expects to release updated check numbers by the end of the year.
More recent trends suggest check use is down across the board.
More than 25 states, for example, use prepaid debit cards instead of checks to disburse unemployment benefits, and retailers have ditched paper checks and gift certificates in favor of prepaid cards for rebates.
A recent Synergistics Research Corp. consumer survey found only 28% of the 1,003 respondents paid bills with checks compared with 75% who used online bill-payment services.
Another online survey from the Auriemma Consulting Group found 46% of 500 respondents were using checks less often. Those respondents reported using cash and credit and debit cards now more than ever.
Sturgill describes mobile remote-deposit capture as a viable technology that could keep consumers using checks as a payment method. “[But] if we want to get rid of them, [banks] need to be looking at other options and not remote-deposit capture,” she says.
Chase views the technology as a way to provide its customers with more choices in how they do their banking, the bank said in a statement to PaymentsSource. The bank also highlighted its Quick Pay service, which allows customers to send someone a code they punch in at a Chase ATM to get money (see story).
“That eliminates the need for a check in that transaction,” Chase says.
Bluepoint Solutions, which develops mobile remote-deposit capture services for community banks and credit unions, views the technology as something that will help banks decrease costs associated with check processing.
Mobile remote-deposit capture helps banks start processing checks without the branch traffic and assists with fraud protection, says Andrew Tilbury, a Bluepoint spokesperson. “All those things are going to drive the cost of a check down,” he adds.
Check volume continues to decrease, but processing costs are still increasing, Tilbury says, unable to provide specific data.
Christine Barry, research director for the Aite Group, believes check use will not increase with the rise of mobile remote-deposit capture. Consumers might be hesitant to use the technology because some may view the mobile phone as a device vulnerable to fraud, Barry says.
Financial institutions also should keep wary of potential fraud as they consider and roll out mobile remote-deposit capture, she adds. “If it’s not implemented properly, it’s going to open up the door for check fraud,” Barry says.
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