Not long ago, payments meant paper, ink, and a trip to the mailbox. Today, consumers expect the opposite—transactions that are contactless, mobile-friendly, and processed in real time. With countless digital payment methods now operating smoothly and instantly, it’s no surprise that checks are being phased out in both commercial and consumer settings. Even the federal government—once one of the largest issuers of paper checks—plans to end their use for tax refunds and other payments.  

Still, a reliable and easily tracked payment system continues to have an important role in the modern economy. Today, electronic checks offer a contemporary twist on this trusted, secure method of payment. And for businesses of all sizes, cutting-edge solutions like Authorize.net can make the transition from paper to electronics seamless by offering secure, fast, and cost-effective eCheck processing.

What Is an eCheck?

An electronic check, or eCheck, functions much like a traditional paper check—customers provide their bank account, routing number, and payment authorization to complete a transaction. The difference is that everything happens digitally, typically through an online form that enables secure electronic processing.

“Checks these days are primarily for handling one-off or rare higher value transactions,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “EChecks allow you to push a payment to a supplier using the same processes you might with a paper check, but entirely electronically.”

EChecks are transmitted through the National Automated Clearing House (ACH) system for electronic funds transfers. Because the process is entirely electronic, businesses no longer have to wait for a paper check to arrive in the mail or be manually deposited. This not only speeds up payment collection, but also reduces the risk of human error. In addition, eChecks help avoid many of the costs associated with paper checks, including employee time and bank processing fees.

“EChecks initiate an ACH push payment,” said Thomas “But because they come over as an email, you save time and paper, and the time in the mail, while still being able to append all the line-item detail that often rides along at the bottom of checks, like invoice numbers the check is meant to cover.”

A Wide Variety of Use Cases

EChecks offer several benefits that make them suitable for a variety of situations.

First, they provide an alternative to credit or debit cards. Customers without access to credit can still make payments using an eCheck.

They also allow businesses to receive direct, secure bank payments. Unlike paper checks, eChecks can’t be lost or stolen, and they are well-protected against fraud. According to Nacha, fewer than 0.03% of ACH transactions are returned as unauthorized.

For businesses, eCheck transactions are typically inexpensive—much cheaper than processing paper checks, which often cost a dollar or two per check, and far less expensive than credit card payment fees.

“Typically in an ACH transaction there’s only a per unit cost, usually in the range of $0.10 to $0.25 for the merchant,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “A credit card will cost them probably 2% to 2.5%. Even with a debit card, the merchant is paying a certain percentage of the sale.”

The low cost makes eChecks particularly well-suited for recurring payments. Fees for other payment methods can add up quickly for monthly transactions, whereas eChecks allow for a one-time approval to withdraw funds from a customer’s account. This enables businesses to automate recurring payments, eliminating the need to manually collect them and providing a significant convenience factor. A comprehensive processing solution like Authorize.net supports automated recurring eCheck payments, reducing manual work and ensuring predictable cash flow for businesses.

“There are a couple of sectors with recurring payments in which eChecks are extremely popular,” said Apgar. “One is public sector merchants, who collect regular fees and fines. If the debit to your account doesn’t process, they don’t need to pursue a chargeback—they can just turn your service off.”

Another area where eChecks are becoming increasingly popular is in large business-to-business transactions, where secure, cost-effective, and trackable payments are critical.

“Receivables processing solutions these days are well equipped to handle eChecks, as they can read attached PDFs automatically and pull the information required to apply payment automatically,” said Thomas. “You get the ability to push a single payment with the same security you get from a check run, but without the paper. An eCheck makes sense for bigger one-off payments to cover multiple invoices or other detailed remittance information.”

An eCheck Case Study

One potential drawback of accepting eChecks is that the setup process can feel intimidating. It typically requires steps such as establishing an ACH line with a bank.

Authorize.net is built to fit into an organization’s existing payments workflows, with white-label options that keep the process seamless and unobtrusive. Its straightforward integration makes onboarding quick, and the system can be accessed from the office, home, or on-site.

Companies that adopt eChecks often discover unexpected benefits. For instance, VIIRL Marketing, a provider of advertising and marketing services, has relied on eChecks and Authorize.net since its founding, finding them to be a reliable part of their operations.

“Automated billing is huge for us,” said Jed Winkler, VIIRL’s president and COO. “We have hundreds of clients across the country where we bill them every single month. It’s good for us to be able to offer multiple different platforms for our customers to be able to pay, and one big one that we use a lot is eCheck.

“ECheck is great for our end users because they don’t have to mail us a check, we don’t have to process the check, and with eCheck we’re able to just process it immediately when we run the transaction on a month-to-month subscription basis. With Authorize.net the payments just work.”

Marcus Piazzisi, Founder of VIIRL Marketing added: “There are several benefits of accepting eChecks from our customers. First, the fees—it’s a lower cost solution. Second, it’s more secure. Finally, our customers really like using it. It’s easy to do and it integrates with all our payment options. Whatever we save on fees, we can put back into customer results.”

Why Authorize.net Works for Businesses

• Quick onboarding and integration
• Lower transaction fees than cards
• Secure ACH processing with fraud protection
• Supports both recurring and one-off payments

If you’re ready to simplify your payments, Authorize.net makes it easy. To learn more about how to make eCheck processing easy, secure, and cost-effective.
Learn more.

The post Beyond Paper: Why More Businesses Are Turning to eChecks appeared first on PaymentsJournal.

There have been stunning breakthroughs in the payments space over the past few years, and many businesses and financial institutions have devoted significant time and resources to researching and adopting new payment methods. Although paper checks might seem outdated, over half of Americans wrote a check last year, and many organizations still rely on them.

Though fraud is a constant focus for businesses, many fraud teams have shifted their attention to emerging payment methods. As Jennifer Pitt, Senior Fraud and Security Analyst at Javelin Strategy & Research, found in her latest report, The Pervasiveness of Check Fraud: Banks are Paying the Price, check fraud is an increasingly rampant threat that financial institutions must address.

Comfort Level

Older adults tend to write more checks each month than younger people, in part because it’s a payment method they have grown comfortable with over the years. Some consumers also send checks as gifts because of the personalization aspect, allowing them to write a personal message to the recipient.

“Many Americans are also still under the mistaken impression that checks are more secure than peer-to-peer platforms, ACH transfers, and digital payments,” Pitt said. “The Javelin report found that most Americans believe those methods are either as secure as or less secure than checks.”

Credit cards were the only payment method that most Americans believed was more secure than checks. That is likely because credit cards have been around for longer and older adults tend to rely on tried-and-true payment methods like credit cards, checks, and wire transfers.

In Search of Checks

Credit cards and wire transfers have fraud risks of their own, but criminals have developed increasingly effective ways to commit check fraud. Although consumers are writing fewer checks, the amounts written have been increasing. In addition, many small businesses issue checks to pay bills or even payroll.

Some utility companies still require payment by check, and federal and local governments will often mail stimulus or treasury checks.

“Over the past few years, there have been more headlines about mail theft,” Pitt said. “Organized street gangs and criminal syndicates have moved away from drugs and other activities because those crimes are often prosecuted harder and there are stiffer penalties. Fraud, and particularly check fraud, carries minimal penalties at the moment.”

Often, criminals will rob mail carriers to steal an arrow key, a master key that opens every mailbox. Once criminals have the key, they will access mailboxes and steal any mail that has personally identifiable information. They are especially in search of checks, because those are easily counterfeited.

One way to counterfeit a check is through check washing, a method that has been around for over a decade. Criminals use normal household chemicals to wash the ink from the check and are left with a valid check that still has all its security measures intact. Bad actors will then change the amount and the payee, but sometimes they will leave the original signature intact.

Check cooking is a relatively new method whereby criminals scan a check into a computer and utilize software to change the check’s information, after which the check is reprinted.

“It’s also possible to manufacture checks from scratch using data from a stolen check,” Pitt said. “At the moment, it is harder to manufacture a convincing check, so check washing and check cooking are the more prevalent forms of check fraud.”

The Big Picture

Though most financial institutions have strong fraud and security measures, checks have fallen by the wayside in many instances. Only 22% of the companies that Javelin surveyed use check fraud detection solutions, which doesn’t align with how rampant check fraud has become.

Many financial institutions have made investments into artificial-intelligence-powered fraud detection tools because AI excels at sifting through data and identifying patterns. AI can be just as potent in detecting check fraud, such as in instances when check signatures are different or a check’s amount does not match historical data.

The technology to combat check fraud exists, but organizations must invest in it. Another key component of a check fraud prevention program is education. It is critical for banks and credit unions to educate their customers on the risks of using checks and the benefits of digital payments.

“What typically happens with fraud professionals is we shift all our resources to the hot topic of the moment, and we can lose sight of the big picture,” Pitt said. “However, the criminals have not lost focus, and they will shift to any avenue that is open. It’s important for banks and credit unions to inform their customers of the risks checks pose. No one should be putting checks in the mail right now.”

The post Amid Payments Innovations, Check Fraud Remains a Threat to Financial Institutions appeared first on PaymentsJournal.

Target has become the latest retailer to stop accepting paper checks as payment, joining other major merchants such as Whole Foods and Aldi. As of July 15, consumers will no longer be able to write a check at Target.

Target cited “extremely low volumes” for the decision, which should not come as a surprise. According to 2022 data from the Federal Reserve Bank of Boston, only 1% of all retail purchases were made via check. However, there are still areas where check writing makes sense.

Check usage has declined sharply in recent years, dropping from 18.1 billion checks written in 2015 to 11.2 billion checks in 2021, according to the Federal Reserve. Nevertheless, the overall value of check payments increased slightly from 2018 to 2021. While the number of check payments dropped, the average value of those payments rose from $1,908 in 2018 to $2,430 in 2021, totaling $27.23 trillion.

High-Dollar Services

Check usage has become almost exclusively the payment of choice for high-dollar services, but not high-dollar goods, according to the Boston Fed report cited earlier. The report noted that “while credit cards are typically accepted for large-value purchases (whether in person or online), large-value services often cannot be paid with a credit card, and consumers instead use checks to pay for those services.”

To that end, the most popular use case for personal checks was paying contractors. The Boston Fed found that a plurality of contractor payments, or 43%, was still made by check. Charitable or religious donations, government fees, and rent were the other categories where check usage was still more popular than either debit cards or credit cards.

Meanwhile, retail check payments have dropped to nearly zero, as the Target decision highlights. The Fed also found that paper check payments for hotels and transportation had declined from 9.3% and 6.5%, respectively, in 2017 to 0% in 2020.

The federal government remains another strong user of paper checks, with 23% of benefit recipients receiving assistance in the form of checks or vouchers. But even that may be diminishing. According to a study commissioned by Visa earlier this year, only 13% of the recipients prefer to get their funds that way.

The post As Target Denies Paper Checks, They Endure Elsewhere appeared first on PaymentsJournal.

Many victims of check fraud don’t realize it until weeks or months after the compromise has occurred. Unfortunately, by the time many consumers report the incident to their bank, they may be too late to receive reimbursement.

Checks are currently regulated under the Uniform Commercial Code, which states customers have one year to report check fraud. However, the law allows this grace period to be modified in agreements between customers and banks.

In some cases, banks require customers to notify them of check fraud within 14 days of receiving their statement. This has left many victims of fraud without any recourse for compensation.

“Unfortunately, it’s an all-too-common occurrence,” said Jennifer Pitt, Senior Fraud & Security Analyst at Javelin Strategy & Research. “Many banks use arbitrary deadlines to avoid assisting check fraud victims. While the courts have ruled banks can determine check fraud reporting timeframes, they shouldn’t use the ruling to avoid taking the proper steps.”

The Cycle of Check Fraud

When there is any evidence of fraud, banks should file a suspicious activity report (SAR) with the Financial Crimes Enforcement Network (FinCEN). If financial institutions simply dismiss a check fraud victim without following the proper protocol, the victims lose a significant amount of money, the criminals aren’t held accountable, and the cycle of check fraud continues.

“In every case where a member alleges check fraud, the bank should issue a provisional credit and investigate,” Pitt said. “As check fraud cases continue to mount, Javelin sees a tipping point quickly emerging. Banks are going to have to find a way to work with their customers to resolve check fraud, or they will start to lose customers.”

A Rising Threat

The U.S. has seen a rise in check fraud over the past few years, and most of those compromises were due to mail theft and check washing. The U.S. Postal Service has urged the public to stop mailing checks because of the sheer number of mail thefts, and even blue postal boxes are no longer safe.

“If possible, consumers should stop writing checks,” Pitt said. “They are far too easy to steal, copy, or alter. In addition, consumers should check their accounts on a weekly or monthly basis for unusual or unauthorized transactions, and immediately report them to their financial institution.”

In addition to reporting check fraud to their bank, consumers should notify law enforcement, who can conduct a more thorough investigation and can potentially identify, locate, and charge the suspect. Reporting fraud to the authorities is critical because the criminals involved could be a part of a larger crime ring.

The post Legal Loophole Could Leave Check Fraud Victims Without Recompense appeared first on PaymentsJournal.

Recipients of government program funds prefer not to receive checks, according to data from Morning Consult on behalf of Visa. Over two-thirds of U.S. adults have received monetary disbursements from the federal government, with the majority opting for  direct deposit as their preferred method of payment.

Three-quarters of those surveyed said they currently receive payments via direct deposit, and an even higher percentage (80%) expressed a preference for it. Meanwhile, the use of checks shows the opposite effect. While 23% of recipients have received government benefits through checks or vouchers, only 13% prefer to get their funds that way.

The survey drilled down on the reasons behind this preference, uncovering various challenges associated with receiving payments via checks. A majority of respondents said it took a long time to receive a check.  More than half (52%) who received funds through a check or voucher reported waiting four weeks or longer for their payment, with 20% waiting more than eight weeks. 

Advantages of Prepaid Cards

Recipients of prepaid cards agreed on their convenience compared to checks. Respondents appreciated that a prepaid card was delivered faster, offered more flexibility, and was more secure.

In addition, more than half said they liked not having to visit a bank. The ability to avoid that was the second-most cited reason for preferring prepaid cards, just slightly trailing the ease of making online purchases with a card.

These preferences also resonate with the unbanked population. Two-thirds of unbanked respondents indicated a preference for receiving government-issued payments—including tax refunds, social security payments, unemployment benefits, disaster relief, and other types of government disbursements—in the form of a physical prepaid card or digital card over cash (24%) or check/voucher (18%).

A Long, Slow Process

The U.S government has set several goals toward moving away from checks, but progress has been gradual. The Bureau of the Fiscal Service set a target to decrease the number of checks printed from 49 million in FY 2021 to 44.1 million by FY 2023.

Meanwhile, the Australian government said it will phase out of checks by 2030. In the last decade, check use in Australia dropped by 90%.  

The post Even Recipients of Government Funds Are Trying to Move Away from Checks appeared first on PaymentsJournal.

American Express has teamed up with Skipify to streamline the checkout process for its customers.

Skipify allows Amex customers to link their eligible cards to participating merchants, eliminating the hassle of manual data entry. Through the partnership, Skipify is able to identify Amex customers via their email addresses, and automatically preloads their checkout with all of their information.

The partnership underscores a fundamental principle: reducing friction is vital to a company’s bottom line. When customers encounter a seamless and efficient checkout process, they are more likely to complete their purchase, leading to reduced cart abandonment rates and increased revenue for merchants. And at a time when consumers are expecting a frictionless experience, it’s even more paramount that retailers offer it.

“Card Linking is a great example of the innovation and customer value that can result from a startup like Skipify teaming up with Amex Ventures,” said Matt Sueoka, SVP and Global Head of Amex Ventures in a prepared statement. “We’re excited to continue working with Skipify to strengthen the relationship with our shared customers by making the digital shopping experience more convenient and secure.”

Frictionless Commerce

Cart abandonment is a growing frustration for retailers. And often a poor checkout experience can stop consumers in their tracks, resulting in a lost sale for retailers.

What retailers need to remember is, less is more—particularly when it comes to the future of e-commerce payments. Just look at how successful Amazon’s one-click checkout has been. Consumers continue to shop via the e-commerce giant’s site for its streamline checkout, because at the end of the day, consumers don’t want to go through various hoops to pay for a product. There are various ways to optimize the checkout experience and keep consumers coming back. At the end of the day, making the shopping experience as seamless as possible and forging a path to a frictionless checkout process is important.

The post American Express Partners with Skipify to Enhance Checkout Process appeared first on PaymentsJournal.

Paying by check may seem outdated in our increasingly digital age, but it remains a secure and reliable payment method that many individuals and businesses still prefer. While younger generations may gravitate towards electronic payment options, older generations often appreciate the familiarity and simplicity of this form of payment. Regardless of your generation, it’s important to understand the fundamentals of check writing and ensure that your checks are accurate and timely to avoid any potential issues. Whether you’re paying rent, utility bills, or making a donation, paying by check is a trusted and time-honored method of payment that continues to serve many individuals and businesses well.

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Data for today’s episode is provided by Javelin Strategy & Research’s Report: How Pay-by-Bank Could Shake Up Payments

Preference for Paying by Check, by Generation

• 31% of the Silent Generation prefer to pay by check
• 23% of Baby Boomers prefer to pay by check
• 15% of Gen X’ers prefer to pay by check
• 8% of Millenials prefer to pay by check

About Report

As older payment methods recede, pay-by-bank is emerging as a contender at the point of sale. It allows consumers to continue using the funds in their checking accounts, as they do with ACH payments, but adds greater security with real-time authentication and confirmation of payment.

Merchants, too, benefit from the security of pay-by-bank payments, because they don’t have to store sensitive consumer information. For banks, there’s a loss of interchange revenue, but they can rework their strategies to remain the most favored payment method by their customers.

The post Paying by Check: Generational Preferences appeared first on PaymentsJournal.

The Australian government said it will phase out of checks by 2030, as it looks to modernize its payments system.  

During the Australian Banking Association conference, Treasurer Jim Chalmers said that Australia’s regulatory infrastructure has not kept pace with the biggest trends and transitions that are happening in the finance world. This is especially true within the digital economy as well as payments.  

Earlier this week, the Australian government released the “Strategic Plan for the Future of Australia’s Payment System” where it summarizes the government’s dedication that Australia’s payment system remains safe, affordable, accessible, and trustworthy. The plan was developed in collaboration with regulators, consumer, industry, and business representatives.  

Some of the government’s priorities include reducing scams and fraud, establishing a new payments licensing network, facilitating cross-border payments, and phasing out the use of checks.  

Checks On the Way Out by 2030

Check use has been on the decline for some time, particularly as consumer behavior has shifted and many are now opting for more efficient payment methods. 

In the last decade, check use in Australia has dropped by 90% , makes up a mere 0.2% of non-cash retail payments.  

As a result to this decreased check usage, banks have stopped issuing checkbooks to new customers—and merchants have also stopped accepting checks as payment. 

Although the government understands that its older population and those living in rural areas still rely on this traditional form of payment, change is still underway as government check usage is set to terminate by the end of 2028 and the complete elimination of the check system will be finalized by 2030.  

“This transition will be gradual, coordinated and inclusive,” Chalmers said during the conference. “There will be public consultation on the transition, including with the states and territories, before the end of this year.” 

The post Australia Plans to Phase Out Checks By 2030  appeared first on PaymentsJournal.

Check deposits have been a constant focus for fraudsters, but during the pandemic we saw a significant decrease in check fraud as government stimulus programs were targeted. By the middle of 2021 however, check fraud was back with a vengeance and the water level has seemingly risen to historic heights. To mitigate risk and  losses, financial institutions should consider partnering with third-party companies, like Fiserv, to help manage and safeguard against rising fraud exposure.

A recent webinar from PaymentsJournal features industry leaders in check deposit solutions, who discuss how they can help financial institutions reduce fraud losses through new technology and insight. The webinar features Brian Riley, Director of Credit at Javelin Strategy and Research; Jeff Burton, VP of Deposit Solutions at Fiserv; and Rodney Drake, Chief Strategy Officer at Valid Systems.

The three speakers provided important insights into check fraud, which are summarized below.

Financial Institution’s without Check Deposits Fraud Tools Are an Easy Mark for Fraudsters

With the increasing risk of check fraud and the migration of transactions to mobile channels, institutions must provide efficient and secure services to customers while managing risk.

“Clients are looking for less friction and faster availability of funds once they deposit a check,” Drake said. “Yet in providing that, the bank is obviously leaving itself exposed to more risk, particularly in mobile.”

Traditionally, there was a significant period between when a check was deposited and the funds were made available. Customer expectations continue to grow around instant payments and availability. But shortening that period can drastically increase risk, making it easier for crooks to commit check fraud.

After the onset of the COVID-19 pandemic, the government injected an unprecedented amount of stimulus money into the economy, much of which was distributed through checks.

“Those checks became easy targets for fraudsters, who took advantage of the lack of investment in fraud prevention in the check business,” Burton said. “Additionally, with more people working from home, more checks were sitting in the mail, which led to an increase in check fraud.”

Checks are obviously not top of mind for many banks as the emphasis shifts toward digital payments. However, Despite the declining check usage, it remains an important payment method and therefore requires investment in fraud prevention to safeguard depositors.

“Organizations have historically invested more money on other payment types like Zelle, ACH, and P2P payments,” Drake said. “Check payments have been neglected due to the perception that it’s a declining business. This makes check payments an easy target for fraudsters since they know where the spending has historically been focused.”

Fiserv has partnered with Valid Systems to offer clients ’ machine learning solutions to detect anomalies in checks that can indicate fraud.

Here are a few ways artificial intelligence and machine learning can be applied:

1. Image recognition: AI and machine learning algorithms can be trained to recognize the features of a genuine check, including the font, the layout, and the presence of security features. Any deviation from these patterns can be flagged as potentially fraudulent.
2. Data analytics: Machine learning can be used to analyze large datasets of check deposits, customer profiles, and transaction history to identify patterns that may indicate fraud. These algorithms can detect anomalies in account usage, such as an unusually large number of check deposits or withdrawals made from a new account.
3. Behavior analysis: AI can be used to detect behavioral patterns that may indicate fraud. For example, if a customer has a history of overdrafts and suddenly begins depositing large checks that clear immediately, this activity can be flagged as suspicious.

By analyzing large datasets, identifying patterns and anomalies, and monitoring transactions in real time, banks can improve their fraud detection and protect their customers from financial losses.

The Future of Deposits

The check processing industry is consolidating, and new technology is being incorporated to speed up check clearing to deliver a best of breed experience for both the institution and the consumer.

“If checks could be converted to instant payments, it would unlock a lot of value and improve the customer experience,” Drake said.

Instant check conversion would greatly benefit the customer experience and reduce costs and risks for banks. This includes improving back-office processing, reducing manual review queues, and minimizing expenses and waste for banks.

To improve the customer experience, banks need to broaden their focus beyond just managing customer deposits.

“Fraudsters are experts in understanding bank policies, so it is important to be proactive in managing risk across all transactions, not just at the point of presentment,” Burton said.

Furthermore, banks can more easily accomplish this by partnering with a third party like Fiserv.

“Fiserv helps smaller institutions compete with larger ones by democratizing the availability of these solutions,” Riley said. “The consortium approach to managing data creates a learning loop and helps all companies involved, regardless of their size.”

As check volumes decrease, the risk of fraud increases, so managing that risk market-wide and investing in technology to safeguard banks’ balance sheets is essential. By doing so, banks can improve the experience for customers and reduce their expenses and costs.

The post Check Fraud: The Threat is Real appeared first on PaymentsJournal.

Checks have seen a steady decline in use — with a 2021 Federal Reserve survey finding a decrease of 7%-8% in check volume annually — but the same clearing processes must still be performed by financial institutions. This reduced volume is prompting financial institutions to consider ways to minimize costs and increase efficiencies in the item clearing and settlement process.

The Current State of Item Clearing

When Check 21 was instituted in 2004, there was great excitement about the new process of handling checks electronically. However, as with any innovation that involved image and electronic processing of checks, it was expensive. Over time, as more financial institutions adopted this technology, the costs did eventually decrease as these processes became more efficient and refined.

“I think the death of the check was greatly exaggerated,” said Tony Rosetti, Director of Fiserv Clearing Network at Fiserv. “Checks are still going to exist. And as the volume continues to decrease, financial institutions are at a tipping point where prices will increase.” 

“Checks aren’t going to die,” said Brian Riley, Director of Credit and Co-Head Of Payments at Javelin Strategy & Research. “They’re going to decrease — I agree with that. But there are still times when consumers and businesses need checks, and that brings out the importance of engineering your clearance network properly.”

“You shouldn’t just set that and forget it. As volumes go down and pricing models change and the whole dynamics change, it’s really a good time to understand what’s going on in your clearance process and to make sure that it’s really managed and engineered to the best possible way.”

Banks currently have a few options for their check-clearing needs. These include the Federal Reserve, private sectors, and private exchanges.

According to Rosetti, the private sector was the catalyst that drove the costs of check clearing down through its less expensive channels over the years. Although the Federal Reserve basically sets industry pricing, they have increased fees over the past few years. The pricing increase is actually a participation fee that is assigned to every financial institution.

What Should FIs Expect from Their Clearing Network?

When it comes to the check-clearing process, financial institutions want to take the most affordable route.

Rosetti added, “Financial Institution’s want the least expensive way, but also want speed and accuracy with their available technology to present, process, and collect funds.” The Fiserv Clearing Network has a 24/7 processing window. The collection process starts in the early afternoon and continues throughout the day. Checks collected are transmitted for presentment within hours and the speed of collection is key to mitigating risk. Fiserv Clearing Network is poised with Fiserv technology to reduce collection time to transmit checks in a more “real time” environment.

Customer service is also very important to financial institutions. Private clearing networks, like the Fiserv Clearing Network offers an end-to-end experience including detecting duplications, adjustment processing, acceleration of exceptions, and mitigating fraud.

In addition, Fiserv has incorporated the collection of Canadian checks and is able to capture, transmit, and settle these items as well. The Fiserv Clearing Network Canadian Image Service, in partnership with PCBB, removes manual processes and any physical shipping, as well as significantly reduces collection time. The service provides collection for items in Canadian or US funds, offers daily exchange rates guaranteed at capture through presentment, delivers real time OFAC verification and 100% funds settlement within two business days.

Key Takeaways

As previously discussed, checks, much like cash, will never become obsolete. “Checks are still going to be around” said Rosetti. “As the check-writing generation ages, we are going to see less check writing, but they’re still going to be there. They are still an important payment vehicle.”

Their continued existence within the payment universe means that checks will need efficient processes in which to settle faster.

“With the Fiserv Clearing Network and Fiserv technology, we’re going to continue to provide the services and improve the services of check collection,” said Rosetti. “Whether it’s the last five checks that are out there, we’re going to make sure that they get presented and received and processed as quickly as they can.”

“Checks aren’t dead — they’re still going to be out there for a while,” said Riley. And you still need your check processing to work well. It’s not just submitting a check for payment; there’s settlement and clearance processes that need to be worked out. What do you do with exception items? That’s where service private network comes into play. You have the infrastructure there that allows leading-edge equipment and well-engineered processes to apply to financial institutions of any size.”

The post As Check Volumes Decrease, Financial Institutions Need to Consider Alternative Clearing Options appeared first on PaymentsJournal.

Americans may not make it a habit to carry around a checkbook anymore, but paper checks still have their significance. Many have replaced paying back their friends by check with utilizing mobile apps such as Zelle and Venmo. However, the matter depends on which friend you are paying back. The Silent Generation is more likely to appreciate a personal check than a millennial.  

According to an article posted to AOL, a recent GOBankingRates survey discovered that 45% of respondents have not written a single paper check in the last year, followed by 23% of respondents who only wrote one check per month.

It is clear people are not using checks for everyday spend anymore—such as paying for groceries. However, checks are still important and have their place in society. Of the 23% of respondents writing one check per month, that single check is most likely for a rent or mortgage payment, which are a lot more expensive than a grocery store purchase. It is possible to make a rent or mortgage payment using a card, but the cardholder is subject to around a 2.85% fee that they must cover. With current dynamics, it simply does not economically make sense to use digital payment forms to pay for rent and mortgage bills.

Rent and mortgage may not be the only use case for check payments. Mercator research found that when card payments are not an option, 47% of respondents utilize paper checks. Electronic checks tie with paper checks at 47% of respondents using electronic checks when card is not an option. With the death of paper checks in question, it is interesting to find that electronic checks tie with paper checks. Perhaps paper checks are not dying as quickly as originally thought.

With the usage of electronic check in jeopardy, it will be interesting to see if personal checks follow the trend. Unless major changes are made to the way payments can be made for popular check-payment purchases, such as rent and mortgage, paper checks are here to stay.

Overview by Sophia Gonzalez, Research Analyst, Debit Advisory Service at Mercator Advisory Group.

The post Personal Checks Are on Their Death Bed, but They Are Not Dead appeared first on PaymentsJournal.

Many financial institutions are in a time of transition. With the continuous decline in check volume,  it’s important for banks and credit unions to find efficiencies where they can. One area where financial institutions can realize immediate benefits is by outsourcing their item processing function. To learn more, PaymentsJournal sat with Joe Pachunka, CIO of Deposit Solutions at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group, to discuss the many benefits of outsourcing item processing.

Focus on Core Business

Though check volumes are declining, item processing is still a vital function for banks, Pachunka noted.

“Check processing can be thought of as a legacy business, but it’s still a very valid channel for transactions,” he added. “And it has to be up 24/7.”

By outsourcing such a manual and time-intensive function, banks can focus on their core business and focus on other areas.

Indeed, Grotta observed that by outsourcing this part of the business, banks can focus more on pursuing innovation.

“Many of the financial institutions I talk to don’t necessarily want to focus on item processing and are happy to have someone else oversee that part of business,” she said. Outsourcing to a respected vendor also enables banks to improve their cybersecurity stance and reduce system resiliency risk, added Pachunka, while at the same time receiving new application features on a daily basis.

“We are seeing some cases where in-house hosted systems applications are rarely updated even once annually,” he continued. “In some cases, updates were not applied for over three years.”

Fiserv, he noted, updates its application software three or four times per year.

“When you consider that we are living in a rapidly evolving cyber risk environment, rapid application deployment of resolved cyber risk findings is key to addressing the ever-increasing risks that are around us,” Pachunka said.

Perhaps it is no surprise then that recent statistics indicate that outsourced financial services will rise by 7.5% annually.

Overcoming Talent Retention Issues

Outsourcing can also help during times when it is difficult to attract and retain talent, such as that we are living in now.

“Retaining talent and expertise to meet in-house needs is hard,” Pachunka said. “The challenges are real and not just in the financial space; every business out there is dealing with this.”

This is especially true in item processing, where “a lot of the people who really understand item processing are starting to retire,” he added.

By outsourcing item processing, financial institutions don’t have to worry about dealing with finding employees to perform this function, and can take advantage of the “bench strength” outsourcers possess.

Banks can also take advantage of economies of scale. As check volumes decrease, as they are in many cases, an outsourced client will see variable monthly costs go down with the volume decline over time, said Pachunka, adding that an outsourced service provider can also scale up if growth or acquisition activity is happening.

He also stressed that banks do not lose control of anything when they outsource item processing.

“We don’t take over the bank’s back office,” Pachunka said. “When you outsource, you should always have a window into the processing, just without hosting it yourself. Most financial institutions we work with don’t feel like they are losing control, but rather giving up the headache of having to deal with this on a daily basis, and even often on nights and weekends.”

Pachunka said when working with a financial institution embarking on outsourcing item processing, Fiserv “takes you through the process step-by-step and makes it as easy as can be.”

Disaster and Pandemic Recovery

For many financial institutions, pandemic recovery plans were largely theoretical until 2020. But when the COVID-19 pandemic struck the world, many were scrambling to maintain operations.

Outsourcing item processing can help during pandemics or natural disasters by working with vendors that are well prepared for such occasions.

Pachunka noted that when COVID-19 lockdowns happened across the world, Fiserv did not miss any posting deadlines for clients.

“Our deposit solutions operations are geographically dispersed across the U.S. and the world for that matter,” he said. “During the first month of the COVID lockdown, we sent additional monitors and equipment to home locations for everyone working remotely.”

He added that even now, Fiserv requires operations employees to work one day per week at home to continually ensure the effectiveness of a remote environment, should it be needed again.

“Our pandemic preparedness plan was exercised thoroughly and proven to be effective,” he said.

Regarding natural disaster preparedness, Pachunka noted that Fiserv’s production and data recovery sites are hundreds of miles apart in the U.S. and based in strategic locations.

“We are in a strong situation as it related to data center support,” he said.

As check volumes decline but are still being used, Pachunka said Fiserv aims to help financial institutions in this area and manage these often time-consuming and manual functions until there is no longer a need for them.

“At Fiserv, we intend to be the last provider standing to process your checks and other items,” he concluded. “We are also preparing the next generation to support item processing until the last check is written.”

The post The Benefits of Outsourcing Item Processing Functions appeared first on PaymentsJournal.

With the unprecedented rise in fraudulent activity financial institutions and their customers experience, the pressure for risk mitigation to reduce losses and protect FI brands is extreme across all payment channels. Fraudsters are more sophisticated and determined than ever, with new tools and technologies that challenge the banking system every day.  

One type of payments fraud, check fraud, has undergone steady transformation. As  check deposit behavior shifts from in-branch to remote channels, the need for financial institutions to protect themselves and their customers against fraudulent activity is key.  

To learn more about the challenges financial institutions face today as they continue to search for ways to mitigate risk, PaymentsJournal sat with Bev Nichols, Product Director of Deposit Solutions at Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group. 

Check Challenges 

Check fraud schemes have evolved and adapted to the greater adoption of digital deposit, which was often the only deposit method available during the pandemic. “[Mobile deposit] has now basically become a standard,” said Nichols, “but as we [made that transition], we came across risk challenges.” The AFP report showed that 66% of respondents believe checks to be one of the most susceptible methods of payments fraud. 

“We often forget just how often we do write checks,” added Grotta. “FIs are investing in their digital transformation, but there hasn’t necessarily been enough investment in activities to support checks.” Consumers and businesses are still writing billions of checks equaling trillions of dollars annually. Banks, credit unions, and their clients and members need fraud prevention that extends beyond manual efforts from overextended FI staff. 

How FIs Can Protect Accountholders (and Themselves) Against Fraudsters 

Marketplace solutions to fraud must align with the modern expectation for speed, convenience, and ease. “What the industry is working toward are ways to not only identify the issues related to fraud, but ways to handle the resolution of those potential fraud transactions in real time and in an automated way,” said Nichols. 

 We’ve worked with many clients to identify the types of check fraud they are experiencing, and one recent example we reviewed were checks that had been photocopied off a computer screen and whose text fields were manipulated.  “Automated tools using AI workflows aid in mitigating this risk,” Nichols pointed out.  Minimizing manual effort and resources—as well as increasing identification speed—is a top priority. 

“Investing in check fraud detection systems isn’t necessarily the sexiest investment [FIs] could make,” suggested Grotta, “but at the same time, some of the automated systems can actually find fraudulent checks that humans just aren’t able to see.” Risk-mitigation technology not only helps combat check fraud, but it also protects the reputation of financial institutions. 

Tackling Check Fraud With Risk Mitigation 

Nichols mentioned four key strategies for mitigating risk: 

1. Set deposit limits: Establishing intelligent deposit limits for deposit accounts can reduce risk for your financial institution, while rewarding good accountholders with higher deposit limits. By using historical data from your account processing system to calculate risk scores for every account and determining automated deposit limit values, FIs can achieve consistency across depositors and offer higher limits to the most valued accountholders while managing risk and ensuring compliance. 

2. Perform image analysis: Deploy risk analysis and scoring methods with software tools to identify and stop advanced check alterations, forgeries, counterfeits, out-of-pattern transactions, and kiting activities. With automated workflows to capture suspicious items and use of historical images, FIs can improve efficiency by reducing false positives and false negatives across multiple transaction types and channels. 

3. Use transaction analysis: Recognize check fraud activity with an analysis and forecasting engine that uses neural network algorithms to recognize patterns of suspicious activity, such as deposit fraud and check kiting. Through machine learning and use of historical transaction data from your core banking system, a benchmark is established for each account type and used to identify suspicious activity.  

4. Analyze with data from multiple sources: Analyze deposited checks to stop fraudulent deposits before they hit the bottom line. With a robust database comprising account and item-level information from thousands of contributing financial institutions, and years of historical data from consumers, processors, and third-party sources, FIs can make faster and more accurate decisions about whether to accept a deposited check or place a hold on the deposit. 

These strategies could be particularly important to small and medium businesses for whom interrupted check payments can prove dire. “A better system with greater throughput provides better protection not just to the financial institution, but also to the small businesses themselves,” noted Grotta. “Helping to approve good checks and providing access to funds more quickly have got to be a great service to small businesses and their all-important cash flow.” 

Best Practices for Mitigating Deposit Risk 

At the end of the day, Nichols explained, FIs need to “take a good look at [their] situation and [their] environment to understand where fraud is happening and what the volume of that fraud is doing.” From there, FIs can build a strategic risk-mitigation road map that aligns with what is actually happening both at each specific financial institution and within the industry at large.  

 Even though the volume and sophistication levels of fraud are increasing, Financial Institutions also have access to more advanced technology and procedures to combat this trend. “Look for tools that capture fraudulent activity from various sources across your institution,” explained Nichols. “Don’t forget, there are two parties to every transaction.” Additionally, ensure that historical data are available, and from a user perspective, offer an easy and efficient UX. 

“Fiserv Deposit Solutions is a global leader in payments and payments processing,” Nichols concluded. “We have a number of these risk-mitigation tools that would help each financial institution to identify fraudulent check activity today.” 

The post Check Deposit Risk Mitigation for Financial Institutions  appeared first on PaymentsJournal.

Over the last few years, mobile banking with financial institutions across the country has soared as consumers happily embrace the shift to digital. It is important for both banks and credits unions to continue to grow their accountholders’ adoption of digital payment methods – specifically mobile check deposits – to not only drive greater end-user satisfaction, but also to address the massive shift to remote and digital transactions. 

To learn more about mobile check deposits, best practices to drive greater accountholder adoption, and the challenges financial institutions face as they continue to search for ways to mitigate risk, PaymentsJournal sat down with Chuck Doherty, Director of Client Relations for Deposit Solutions from Fiserv, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group. 

Checks are still relevant 

For 40 years people have been saying that checks would disappear – and yet they are still in use. Billions of checks were written last year in the U.S. alone, and although check use is steadily declining, checks still account for 7% of all consumer transactions.  

Typically, check users write about three checks per month and the average dollar value of each check is about $300, versus the $87 average across other payment types. Checks are often used for household phone or cable bills, as well as payments for tradespeople such as plumbers or landscapers.  

“Even if a consumer may use a digital interface [for bill pay],” noted Grotta, “on the back end, that actual payment may still go by check.” 

Businesses tend to write even more checks than consumers, in large part because many accounts payables systems are based on paper and those departments are comfortable with checks. Between consumer and business use cases, financial institutions must continue to address the traditional payment form of paper checks. 

“Somebody once referred to payments as a superhighway,” said Doherty. “You don’t necessarily take away lanes… you add another lane, then another lane, as the traffic keeps increasing.”  

Moving towards digital deposits 

Alternatives to depositing paper checks at a branch, such as electronic images and scanning, have been around for years, but financial institutions have been slow to drive customers toward adoption. That is changing as accountholders are asking for easy, quick, and convenient deposit transactions such as mobile deposit.  

Mobile deposit is most prevalent among 18-24-year-olds. It seems the instinct among younger generations is to rid themselves of any physical funds as fast as possible. 

It is not only Gen Z preferences that are shifting towards mobile deposit; the second largest group is ages 45-54, for whom 50% prefer mobile as the most frequent check deposit method. Even among ages 55-64, 32% use mobile deposit most often. Regardless of age, the COVID-19 pandemic caused people to start seeing the convenience of mobile deposit solutions. 

“We used to talk a lot about the digital divide, where the young folks were digital and the rest of us were just kind of lagging behind,” Grotta pointed out. “We’re certainly seeing that change quite a lot. It’s what I call the blurring of the digital divide.” 

Best practices for mobile deposits 

Once upon a time, most bank customers and credit union members preferred to deal with their financial institutions one-on-one and in person, but all signs point in the opposite direction these days. Doherty recommended several ways financial institutions can match current consumer expectations: 

• Raise the deposit limit –  A higher dollar limit increases the likelihood that accountholders will use mobile deposit more often. And the opposite is also true – accountholders have indicated that low limits are a main reason they don’t deposit this way.   
• Increase deposit review thresholds – Financial institutions may initially claim they want their staff to review every mobile deposit that they receive but will quickly realize it consumes too much time. Picking a comfortably high review threshold value and giving clear guidance to staff can make reviews much more efficient. 
• Deploy risk mitigation tools – This technology is key to assuage any charge-off fears that come with higher deposit values. Financial institutions should use tools to verify digital signatures, check for identity alterations and counterfeits, and monitor consumer or member behavioral patterns, deposit velocity, number of deposits, and more. 
• Adjust funds availability policy – Slower access to funds is one of the main reasons people avoid mobile deposits; if someone deposits a $5,000 check and only sees a $100 credit that day, they might be more likely to visit the branch in person, which may provide full same-day credit. 
• Eliminate online banking enrollment – Automatically enable mobile deposits through mobile apps for new customers or members, rather than adding an extra hurdle to the process. 
• Promote mobile deposits – Market the mobile deposit feature through promotions to encourage customers and members to use the mobile deposit channel, regularly. 
• Train and incent staff – Progressive banks and credit unions often have “Digital Ambassadors” who help customers or members figure out how to make mobile deposits, use mobile banking and more. Ensuring consumer-facing staff understand the value and benefits of mobile deposit turns them into advocates for the service. 

Impactful for branches and financial institutions at large 

Mobile check deposits can make a significant difference to banks and credit unions. “It really can lessen the burden on branches and allow the staff to focus on sales or on other things – what a lot of institutions call universal banking,” Doherty explained.  

In addition to driving greater deposit volume, increased mobile deposits can also reduce branch expenses. “There’s been a lot of talk about the Great Resignation… a lot of banks and credit unions have experienced that,” mentioned Doherty. “We’re in a very tough period for hiring and retaining employees. This might be one way of addressing that, since having more deposits coming in digitally would reduce the need to have as many people in the branches.” 

Finally, mobile deposit solutions help banks and credit unions remain competitive. Moreover, these solutions align with broad digital transaction benchmarks that financial institutions might set. At the end of the day, the move towards digital depositing is all about enhancing the accountholder’s experience and driving deposit growth at the financial institution.  

“Bank and credit union customers and members want these products,” concluded Doherty. “They want to be able to make mobile deposits, they want to make other digital deposits, because it just makes their lives so much easier.” 

The post Driving Accountholder Adoption of Mobile Check Deposits  appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Viewpoint: Examining P2P’s Remarkable Growth and Promising Future Projections

The Decline of Checks and the Shift to P2P:

• The overall number of checks written annually fell from 22.5 billion in 2012 to 15.5 billion in 2018.
• P2P transactions have seen extraordinary growth during this same period, rising from 138 million in 2012 to 711.7 million in 2018.
• The levels of utility still differ by magnitudes, with the rate of checks written remaining much higher than P2P transactions.
• Mercator Advisory Group forecasts a 1.4% decline in the growth rate of checks through 2023.
• P2P is estimated to grow at a rate of 37.8% during the same period. 

About Viewpoint

While P2P adoption began slowly, recent years have seen truly remarkable growth in both the number and volume of person-to-person transactions, and the shift towards P2P is expected to continue for the foreseeable future. This viewpoint reviews the history of the U.S. P2P market, examines the implications of P2P’s rise for other payment types, and offers projections for the future.

The post The Decline of Checks and the Shift to P2P: appeared first on PaymentsJournal.

Yesterday the U.S. Postal Service (USPS) announced a pilot program offering the opportunity for individuals to cash checks in a few of its branch offices. This is a small pilot and currently the checks that can be cashed in a post office will be limited to payroll and other business checks under $500.00. No word about cashing government checks. According to The American Prospect,  the USPS will charge a flat fee of $5.95 which puts it a little higher than other check cashing services.  CBS News had further details on the pilot, finding that the cash will be placed on a prepaid card, likely to relieve post offices from having to load up on cash:

The USPS pilot allows customers to use payroll and business checks to purchase gift cards, and is aimed at providing an alternative to traditional check cashing, the USPS spokeswoman said. The gift cards have a limit of $500, and checks larger than $500 won’t be accepted, she added. 

Why would the postal service offer a product with such limited appeal? Since there doesn’t seem to be much value in this service, it’s possible the answer is political.  Some member of Congress see this pilot as a first step on a path to have the USPS offer not just check cashing services but free or low cost accounts to reduce the ranks of unbanked individuals. This ignores the data in the last FDIC report on the U.S. unbanked population which finds the level of unbanked at an all-time low, and the number of the unbanked that actually want an account is also relatively low. A broad array of financial services are available at a low cost through retail locations like Walmart. Additionally, consumers can easily acquire an account or full banking services online for free through traditional financial institutions or fintech providers. The option of getting a free payroll card or account through an employer is also quite common. 

Those that are in rural locations without reliable internet access (and therefore will have difficulty opening a digital account) cannot be ignored, of course, but they will not necessarily be served by a post office either. The postal service has been closing remote post offices with low use for years. If Congress truly wants to get financial services into the hands of more individuals, a focus on expanding reliable broadband services would be more effective. 

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post U.S. Postal Service Check Cashing is More Political than Practical appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: North American PaymentsInsights, U.S.: Data Summary Report; ATM Usage and Preferences

Consumers’ Preferred Method of Depositing Checks by Deposit Size:

• Going to a teller in a branch is consumers’ preferred check deposit method for both $50 and $1,000 checks. 
• 41% of consumers prefer to use a teller in a branch to deposit a $1,000 check.
• In comparison, 35% of consumers prefer to use a teller in a branch to deposit a $50 check.
• The second most preferred method of depositing a check is scanning it with a PC, smartphone, or tablet.
• 26% of consumers prefer to deposit a $1,000 check by scanning it with a PC, smartphone, or tablet.
• 30% of consumers prefer to deposit a $50 check by scanning it with a PC, smartphone, or tablet. 

About Report

Mercator Advisory Group’s most recent report, North American PaymentsInsights, U.S.: Data Summary Report; ATM Usage and Preferences documents consumers’ current usage metrics of ATMs in the U.S. national market. The survey of 3,000 U.S. adults (December 2020) represents a continuation of a series of consumer and business surveys conducted annually by Mercator Advisory Group since 2009.

This Data Summary Report presents the survey results for U.S. consumers’ use of ATMs, through commonly-used graphs with core demographic breakdowns, for easy incorporation in planning/analysis documents. This is just one of multiple Data Summary and Analysis Reports on the United States for program subscribers from this survey, on topics including Buy Now, Pay Later lending, bill payment, subscription buying, fraud experiences, and effects of the COVID-19 pandemic.

“These survey results provide up-to-date baseline data for financial institutions and other stakeholders serving the U.S. market,” stated Amy Dunckelmann, Vice President, Research Operations at Mercator Advisory Group. “The U.S. continues as a dynamic market for the ATM industry.”

The post Consumers’ Preferred Method of Depositing Checks by Deposit Size: appeared first on PaymentsJournal.

Nothing has been highlighted more in the past 15 months than the importance of positive cash flow, especially in certain industries more directly affected by the pandemic. Understanding the cash position of your firm and the predictability of flows are key to the planning cycle. 

In this particular posting at Affordable Housing Finance, written by staff at JPMorgan Chase, we have an example of how bank-provided treasury services can help manage such complications and keep your business afloat.  The case offered in this piece is around building owners of affordable housing units.

‘The questions seem simple enough: Who are you paying? How are you paying them? Who are you collecting payments from, and how?…Yet, as most multifamily affordable housing owners and operators will tell you, answering those questions is seldom simple or easy….Cash management and accounts receivable/payable is a rolling challenge—especially amid widespread disruption, like a global pandemic. Knowing with precision what your cash position is at any point in time requires exceptional reporting methods. This is all the more true when receipts are arriving from all sorts of directions, such as: Checks; Money orders; Payment subsidies from local, state, or federal sources; and Wire transfers from funding sources.’

The piece goes on to mention the types of assistance that the bank can offer its clients, including those that may be assumed to carry a fee but are absorbed as part of the relationship.  The ability to digitize processes in cash operations is very important to controlling an organization’s liquidity position, especially in uncertain times. 

Taking advantage of professional services is something that these types of firms should be considering. As more data is available in digital form, the ability to utilize that data with modern tech creates further opportunities to improve working capital as a strategic advantage.

‘“Owners and operators should have a strategic perspective on the best ways to finance their projects and how to best leverage working capital,” he says….Businesses ought to embrace the opportunities that treasury services present. Consider banking partners with the talent, resources, and commitment needed to transform your treasury functions into a strategic business asset.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post The Unexpected Benefits of Treasury Services appeared first on PaymentsJournal.

There has been a lot of investment around healthcare payments in the last 12 months. And for good reason. Payments for healthcare amount to approximately 17% of U.S. GDP and many are still made by check. 

The impact of the pandemic forced a great deal of change in payment practices in this vertical as it has in so many others. U.S. Bank announced the results of a recent study they conducted to understand consumers’ thoughts about the way that they pay for health care. The full announcement can be found here. 

Some of the key findings from the survey conducted in February of this year are as follows:

• Virtual care and contactless payment methods rule: 64% had a telehealth appointment in 2020, and 68% were in favor of expanding access to telehealth when feasible.Device sanitation became more important than ever during the pandemic: 76% of consumers said they were somewhat or extremely concerned about touching payment devices.
• Digital payment options are gaining traction, but there’s room for improvement: Within the last 12 months, 44% paid for their care at the doctor’s office at the appointment, 28% paid via the provider’s online portal, and 23% paid via mobile app. However, more than 32% paid by mail, and 21% called in to pay their bills.
• Patients want more digital options to pay their bills: Nearly half would like their provider to offer the option to pay via contactless credit or debit card, and nearly 60% said their perception of their provider would improve if he/she offered contactless options. Forty-three percent said they would be more likely to use a portal if they could pay their balance and view payment history.
• Many find paying their bills difficult: Nearly a third (28%) said they wished healthcare was more like the banking industry when it comes to payment types and payment options. Nearly a third said their provider’s digital options did not provide enough information about their payment history or balances due.
• Consumers are worried about the security of their data: Consumers continue to worry most about their Social Security numbers and credit/debit card information being stolen, but healthcare is perceived more positively now than in the past relative to other industries.
• Affordability of care is a challenge: 37% consider a medical bill of $100-$500 too expensive, and nearly half of those surveyed were surprised by a high medical expense in the last year. Of those who could not pay for an unexpectedly high expense right away, 38% chose to make recurring payments, and 26% used a credit card.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post U.S. Bank Finds Digital Payments for Healthcare are Gaining Traction appeared first on PaymentsJournal.

Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left of your screen to receive notifications as soon as the episode publishes.

Data for today’s episode is provided by Mercator Advisory Group’s Report: 2021 North American PaymentsInsights, Canada – Data Summary Report: ATM Usage and Preferences

Canadians’ Preferred Check Deposit Method Varies By Age:

• For young adults (ages 18-34), the top preferred method for depositing a $1,000 check is scanning it with a PC, smartphone, or tablet.
• 28% of young adults prefer scanning a check with a PC, smartphone, or tablet as their top check deposit method.
• 26% of young adults prefer using an ATM and 25% prefer going to a teller in a branch for check deposits.
• In comparison, the top preferred check deposit method for older adults (ages 55+) is going to a teller in a branch.
• 41% of adults 55+ prefer going to a teller in a branch to deposit a $1,000 check.
• Using an ATM (31%) and scanning a check with a PC, smartphone, or tablet (22%) came in second and third as older adults’ preferred check deposit method.
• Going to a teller in a branch, using an ATM, and scanning checks with a PC, smartphone, or tablet were the top three preferred check deposit methods across every age group.

About Report

Mercator Advisory Group’s most recent report, North American PaymentsInsights, Canada – Data Summary Report: ATM Usage and Preferences documents consumers’ current usage metrics of ATMs in the Canadian national market. The survey of 1,000 Canadian adults (December 2020) represents a continuation of a series of consumer and business surveys conducted annually by Mercator Advisory Group since 2009.

This Data Summary Report presents the survey results for Canadian consumers’ use of ATMs, through commonly-used graphs with core demographic breakdowns, for easy incorporation in planning/analysis documents. This is just one of multiple Data Summary and Analysis Reports on Canada which will be made available to program subscribers from this survey, on topics including “Buy Now, Pay Later” lending, bill payment, subscription buying, fraud experiences, and effects of the COVID-19 pandemic.

“These survey results provide up-to-date baseline data for financial institutions and other stakeholders serving the Canadian market,” stated Amy Dunckelmann, Vice President, Research Operations at Mercator Advisory Group. “Documenting Canada’s unique consumer profile is key for providers serving or entering this diverse market.”

The post Canadians’ Preferred Check Deposit Method Varies By Age: appeared first on PaymentsJournal.

In this acquisition announcement at businesswire reviews details around the agreed Deluxe acquisition of First American Payment Systems.  Readers will recognize the 100-year-old Deluxe, the Minnesota-based Fortune 1000 that is traditionally known for check processing and receivables management but undergoing a transformative process as the world moves quickly towards digital payments. 

First American is a privately held fintech company out of Texas that does merchant acquiring and tech solutions. One might describe the 30 year old company as a large ISO/processor for small and medium merchants that has grown substantially in that timeframe. So this move seems logical as the consolidation trend that started a couple of years ago continues across many forms of payment processing companies.

‘Deluxe…today announced an agreement to acquire First American Payment Systems (“First American”) for $960 million in cash, subject to customary adjustments. This transaction is expected to accelerate the company’s transformation into a leading payments technology company as part of its One Deluxe strategy…. “This is a major, logical and responsible next step in our transformation. With electronic payments playing an increasingly important role across the economy, the addition of First American’s independent, leading payments platform will advance our One Deluxe strategy and our overall growth trajectory,” said Barry McCarthy, President and CEO of Deluxe. “Deluxe serves an integral part of the payments industry, with our software and services processing more than $2.8 trillion annually. First American’s end-to-end payments platform presents significant cross-sell opportunities as we continue to invest in our higher growth Payments segment, and this combination will create a multitude of opportunities to drive tremendous value for our shareholders”. ‘

The posting is worth a read since it has a lot more detail that these types of announcements usually carry.  The fit seems quite good since there is not much visible overlap across the business models, so some economies of scale can occur along with fresh combined revenue opportunities.  The SME space is a generally coveted target across the payments industry so that would be a clear play for the expanded Deluxe.

‘ “Today’s announcement is a testament to the accomplishments of the First American team over the last 30 years that have established our company as a deeply trusted payments partner with an unwavering focus on customer service,” said Neil Randel, Chief Executive Officer of First American. “In joining forces with a Fortune 1000 publicly traded company, we are advancing our mission to create innovative solutions as we continue to help our customers succeed and prosper. I look forward to working closely with Barry, Mike and the team to exponentially grow our combined company and deliver enhanced value to all of our stakeholders.”…Upon close of the transaction, the First American management team will join the Deluxe Payments team, and Randel will become Managing Director, Merchant Services.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Deluxe to Acquire First American Payment Systems appeared first on PaymentsJournal.

Citi has added the capability for its corporate clients to push credit transactions to consumers through the use of the debit push payment solution, Mastercard Send, delivering transactions typically within seconds. Send joins other payment types like ACH on the treasury platform providing clients with a choice of payments. 

What I find intriguing about this is that Citi has been an early adopter of The Clearing House’s RTP network.  This highlights the breadth of options and the rich, competitive market that has developed in the U.S. for payments that are faster and always available. 

These payment types will likely continue to develop side-by-side, serving specific markets and use cases. Here’s an excerpt from Mastercard’s and Citi’s announcement:

Citi^® Payment Exchange provides Citi commercial clients with the ability to send Business-to-Consumer (B2C) payments via their customers’ preferred method of payment. It also incorporates payee enrollment services, a payee database, online payment preference management, an administrative platform, dedicated support, bank-grade data security and storage all in one.

By leveraging various electronic payment options, including ACH and now near real-time payments to debit and prepaid card accounts, organizations can simplify and help reduce payment costs while providing an exceptional and brand building user experience for their clients. In the United States, Mastercard Send reaches virtually all consumer and small business debit cards, delivering a quick and enhanced consumer experience. Consumers won’t need to receive a check in the mail, deposit a check, or share sensitive bank routing information. In addition, they will benefit from near immediate access to funds.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Citi’s Treasury and Trade Solutions Adds Mastercard Send for B2C Transactions appeared first on PaymentsJournal.

For new subscribers or readers who may not have been paying close attention, check usage among U.S. businesses lost some popularity after work from home policies were implemented starting in March/April 2020. 

We only have some varied survey data touching here and there on the subject, as well as anecdotal evidence, but would venture to estimate a 5-10% YoY reduction in checks for accounts payable use cases, which may be the new normal as businesses continue to invest in cash cycle automation.  This referenced piece is posted in CPA Practice Advisor and was written by the CEO of a payments fintech. 

‘Given the choice, accounts payable professionals would make the move to digital payment solutions. And those who already have are quite pleased with the decision. Around three-quarters report being “very” or “extremely satisfied” with digital wallets, and almost 70% feel the same about e-payables. When it comes to paper checks, however, that satisfaction rate dips to 63.5%…With ongoing digital transformation in the finance industry, it’s no wonder paper checks have fallen out of favor. At the same time, the pandemic has only served to solidify this preference: Despite stay-at-home orders, companies without digital payment infrastructures were left with no other choice than to send employees into the office to open mail, send invoices, and deposit checks — a risky ask that could have been avoided.’

We just released member research on the topic of business cash cycle automation, which is actually a fairly long-term trend, but received a real boost in interest during 2020. Generally speaking, companies that have adopted some level of automation in financial operations have done so in a surgical way, installing digital solutions to fix a particular issue. 

The more effective way to effect lasting and effective change is to look at the big picture and see how to make the end-to-end process more connected and rational.  The often forgotten benefit is the value-add from usable data, which can then be optimized by the growing use of RPA and machine learning.  Companies that are not thinking about this will eventually be looking at competitor exhaust fumes, most specifically in the effectiveness of cash flow and cost of capital.  Worth a quick read as a reminder.

‘Cost savings is often the most noticeable benefit of moving to a paperless AP system. You no longer have to pay for checks, envelopes, and stamps, nor are you devoting precious hours tracking down signatures and managing the paper check process. Going paperless streamlines the entire workflow….Moving toward AP automation also has a way of increasing visibility, thereby establishing greater payment controls for companies. Real-time insights into payments are just a few clicks away, providing a glimpse into the payor-payee transaction history and helping to identify and reduce the number of missing or bounced checks — a time-consuming task endemic to a manual AP process.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post The Future of Finance Is Leaving Paper Checks in the Past appeared first on PaymentsJournal.

Digital payment adoption for B2B uses had seen a relatively slow but steady growth trend during the past decade in the U.S., with check usage declining at about 2-3 percentage points per year.  In 2020 that likely accelerated, perhaps into the 5-10% range, but we won’t know that until later in 2021 after some surveys are released. 

The Fed Payments Study is always lagged by a year, so that won’t show anything about 2020 until next year.  However, it seems assured that a new wave of digital adoption in underway, exceeding the relatively tepid pace of the prior decade.  We have covered this in a number of ways, including the 2021 Outlook.

In this indicated posting at CFO Daily News the author notes some of this and the generally accepted beliefs around how B2B payments will eventually become fully electronic. The adoption of ISO 20022 as a global messaging standard is in process, through real-time payments systems that have been getting launched across the globe as well as planned conversions by the Fed (Fedwire), TCH (CHIPS) and SWIFT. The author makes the point that interoperability is the key factor.

‘We are seeing interoperability as the answer to shifting from the paper check towards mass B2B digitization and automation….Interoperability, in this context, requires a network of networks connecting multiple parties – from settlement networks and participating banks to ERPs and integrated payables platforms – allowing for multiple payments languages to flow through a single exchange….If you’re like most consumers, you have a debit card allowing you to withdraw cash from a terminal. How does the machine know how much money you have in your bank account?…You guessed it – interoperability.

It is likely going to be a combination of factors, but the network of networks idea is being pursued  by the big card networks, using the global settlement capabilities to promote account-to-account transfers, among other things.  A quick piece to read for perspective.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Why Interoperability Represents the Future of Digital B2B Payments appeared first on PaymentsJournal.

You wouldn’t think it would be so hard, but it is. Treasury is still trying to get money to an estimated 8 million Americans that didn’t receive the first $1,200 stimulus checks from the CARES Act which are likely the same people left out of the $600 checks that were issued in December.

This came after Treasury decided not to provide a web site enabling users of existing prepaid cards to register for the funds, instead awarding a prepaid delivery contract to Visa and First Data much to the annoyance of other prepaid issuers: 

“That’s because the $600 checks authorized by Congress last month expanded eligibility to include families with mixed-status households, where only one spouse has a Social Security number. Now, family members including spouses and children who hold Social Security numbers are eligible for those payments. That applies retroactively to the $1,200 CARES Act checks.

“I am hopeful that the IRS will revamp the non-filer portal for this year,” Jacoby said. “It’s certainly easier than filing a tax return.”

The tool could be made more user-friendly, such as adding compatibility for mobile phones and making it easier for non-English speakers, she said.

In a statement released on Friday, the Treasury Department said it plans to add simple options for people who have not filed tax returns, including those who do not have internet access or do not speak English.

The agency also said it plans to reach out to people regarding “hundreds of thousands” of unused $1,200 checks or debit cards that were sent. The Treasury Department and IRS will either reissue payments or encourage those affected to claim the money on their 2020 tax returns.

In addition, the agency plans to evaluate where more households have not received the money in order to better target their outreach to affected ZIP codes.

“As part of this new effort, Treasury will build on that work done to date – incorporating lessons learned over the past year – to reach households who either were not issued payments or who otherwise were unable to access their funds,” the agency said in a statement.”

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

The post Treasury Still Fails at Giving Money Away to Low Income Families appeared first on PaymentsJournal.

This referenced posting comes from CPA Practice Advisor and its sub-title gets to the gist of the content; essentially, even though the pandemic has brought about companies’ desire to drop check processing as part of AP/AR, there still needs to be a reasonable business case presented to make the switch. 

This is likely more applicable as organizations grow in size, but remains a hurdle. The author is a senior at a payments automation company.  The piece has a couple of click through pieces that offer some additional insight as well, such as a brief history of paper checks.

‘Paying suppliers by check is a practice that has endured for much longer than anyone would have imagined. For a while, it looked like COVID-19 might be the tipping point for companies to go completely electronic. After an initial push in that direction, however, many accounts payable departments still send their workers into the office to process invoices and manage the manual check process….It’s not enough to want to get rid of paper checks. The case against them is not strong enough on its own. It has to be combined with a strong business case in favor of something else.’

So as Mercator Advisory Group has pointed out in prior commentary here and in member research, the pandemic is a catalyst for change, and has greased the wheels for further acceleration of digital financial processes. However, there are reasons that companies still hesitate, as the author points out.

‘Even though manual processes are expensive, there are some rational arguments for relying on check payments. You don’t have to enable suppliers for electronic payments, manage banking data, or worry about ACH fraud. You can even outsource the process. While suppliers generally like the idea of electronic payments, they can also be deterred by complex enrollment processes….People may also still be attached to the idea of check float. Even though interest rates remain at historic lows, it can provide a sense of security to see money in bank accounts for longer. Some businesses even have tenured employees who are used to older processes.’

The piece goes on to describe a framework for building a business case to digitize payments, using the four Es mentioned in the posting’s title, which are; Economics, Efficiency,  Experience and Ease of Implementation. We like the mention of opportunity costs in the Economics section, since not only can the AP team be doing something more valuable with the time saved through switching from paper, but as we have been explaining in various discussions, digital processes also allow for the greater use of advanced technology such as AI and API integration.

The article is a good, quick read for interested parties.

’ Perspective is everything. It’s rarely enough to point out how to disrupt the norm–you have to paint a picture for a better future. When writing a business case for payment automation, draw attention to the permanently simplified (and cheaper) workload that automated processes would bring, rather than focusing on the temporary unfamiliarity of your solution. Keeping that kind of mindset may accomplish what years of manual effort have not: eliminating business check writing once and for all.’

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group

The post Another Case in Favor of Payment Automation appeared first on PaymentsJournal.

It appears that there will be a second round of stimulus funding with the next few weeks for some citizens. I was waiting for someone to write an article about how real-time payments or a Federal checking account offering would solve the issue of quickly processing these payments. And here it is. 

The article outlines the issues that plagued the first round of payments back in April, including:

1. Millions of payments were made through checks since account details were unknown
2. Direct deposits transactions were sent to closed accounts and checks were mailed to old addresses
3. Payments made on a prepaid card were inadvertently thrown away by recipients

The article suggests that real-time payments could solve these issues:

One measure that could reduce the amount of time it takes for people to access their stimulus payments could be implemented by the Federal Reserve. It’s simply a matter of reducing the amount of time it takes for a check from the government to clear.

Some banks gave people early access to their stimulus checks, instead of waiting until the next business day. “After all, a Treasury check is not going to bounce,” Klein wrote. But that wasn’t the case across the board.

In addition, the Federal Reserve introduced in August 2019 its proposal for FedNow, a real-time payment system. But a September hearing in the House Committee on Financial Services demonstrated that support of these measures isn’t universal. A real-time payment system run by the federal government could stanch competition in the banking scene, opponents have claimed.

While real-time payments are already offered through The Clearing House and will eventually be offered through FedNow, these payment rails move funds quickly between accounts when account details or an established account alias is known. They will not speed up check clearing.

Another recommendation the article makes to solve the identified issues is the development of an account offered by the Fed through the Post Office:

Meanwhile, there is ongoing discussion about the possibility of having the Federal Reserve dive into the banking scene even further, by launching digital accounts to get funds to recipients more quickly.

In March 2020, in advance of the passage of the CARES Act, Rep. Maxine Waters (D-CA) introduced legislation that would create digital payment accounts for people without bank accounts. These digital accounts, called “FedAccounts,” would be maintained by Federal Reserve banks and charge zero fees for participants. The move would make it easier for underbanked and unbanked people to access their economic relief payments without having to pay check-cashing or other access fees. 

While the hardships faced by individuals without a bank account are very real, there is in fact an abundance of options. Many financial institutions offer free or very low cost account options. There are digital-only banks that offer cost effective solutions that can be opened anytime, digitally. If a person does not have internet access, general purpose reloadable prepaid cards that can be purchased at many retailers offer a wide variety of banking services including ATM access, bill pay and P2P transfers. 

So if these low cost options are available to the unbanked today and consumes choose not to acquire them, how would a post office account change that equation? The U.S. doesn’t lack solutions, it struggles with current and accurate data on each individual.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post With Another Economic Impact Payment Likely, How can the Payment Process be Improved? appeared first on PaymentsJournal.

Yesterday, Senate Republicans released their plans for the next pandemic-related economic rescue package. While the Republican proposal has some substantial differences from the plan laid out by Democrats back in May, there is one commonality: another round of direct payments to Americans.

Similar to the first round of payments, the Republican plan would send $1,200 to single filers making under $75,000 and $2,400 to joint filers making under $150,000 a year. Families would also get an additional $500 per dependent. With both Republicans and Democrats proposing another round of direct stimulus payments, it is likely that taxpayers will indeed receive a second check from the government.

While another round of payments seems inevitable, the timetable is still unclear. The Republican plan, totaling nearly $1 trillion, is far more limited than the Democrat’s $3 trillion proposal, meaning that much negotiating is needed before both sides can agree on a final proposal. In addition to the differing price tags, the major stumbling blocks revolve around unemployment insurance, funding for schools, contact tracing, and testing, and protections for employers against virus-related lawsuits.

Once the sides do overcome these differences, however, Americans can begin to receive the stimulus payments quicker than they did in the first round. The first round of payments was riddled with problems and delays, but now that the IRS has account information for millions of more Americans, the process should be expedited.

As Sarah Grotta, an analyst at Mercator Advisory Group, pointed out:

“The first time around, 81 million ACH direct deposit transactions were made and 14 million people used the portal on the IRS website to enter their account information or their prepaid card information so they too could receive a direct deposit. The IRS has retained this account information to expedite the potential second round.”

Therefore, when the final details of the proposal are agreed upon, Americans can expect to see the stimulus payments within a few weeks.

The post Americans Likely to Receive another Round of Stimulus Payments appeared first on PaymentsJournal.

The trigger date to end the $600 per week unemployment stimulus is a week away, and as Congress looks for a viable solution, top credit card execs warn that a failure to act will cause economic havoc, particularly for the credit card industry. Business Insider reports:

• Some of the biggest names on Wall Street are pushing Congress to speed up deliberations on a second stimulus bill, no matter the cost.
• Most major banks surprised to the upside with their second-quarter results as bolstered credit reserves were overshadowed by soaring trading-desk revenue. The strong performances were made possible by a combination of Federal Reserve monetary support and market volatility.

Three top industry executives support a quick response to the deadline.

• The economy is “still facing a very, very uncertain” outlook, Goldman Sachs CEO David Solomon said Wednesday, and a hefty government response is likely the best option for stemming additional pain.
• “Even though it’s hard and it’s expensive, we are better to blunt the economic impact now in the short term, by spending more, than to allow it to get worse and deal with the consequences of being worse,” he said in an online event hosted by the Economic Club of New York.

As reported in the American Banker,

• “So far our customers are making their payments,” Discover Financial Services Chairman and CEO Roger Hochschild said Thursday. “We do worry that if [government aid is] pulled back too quickly it’ll both impact not just those who were getting support” but also slow overall consumer spending. “The withdrawal of that stimulus is going to impact everyone,” he added.
• Just as the unemployment bonus is about to expire, the number of unemployment claims made for the week ending July 18 jumped by 109,000 from the previous week to more than 1.4 million, the Labor Department said Thursday. The increase broke a streak of weekly declines going back to the end of March when businesses closed to prevent spread of the virus. In total, almost 53 million unemployment claims have been filed over the past 18 weeks.
• “I’ve seen a lot of things, but nothing like this in terms of the speed and magnitude of the impact the pandemic has had on the economy,”
• Hochschild said on a call with analysts Thursday. “I don’t think any of us in business have seen this.”
• Margaret Keane, the CEO at Synchrony Financial, expressed similar concerns in an interview with CNN this week. With the unemployment rate at 11.1% and COVID-19 cases rising sharply in certain parts of the country, she is worried that consumer defaults will surge unless new relief measures are put in place.
• “As forbearance and stimulus wears off, we’re definitely in a rockier place,” Keane said.

This is a classic pay-me-now-or pay-me-later challenge. With unemployment in double digits, and consumer spending dropping, there is plenty on the table, not just for consumers but also small businesses. Fortunately, the infrastructure is in place to move the money quickly; the challenge is to start the momentum and get the process rolling again.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

The post Economic Stimulus: Running on Empty or Saving the Credit Card Consumer? appeared first on PaymentsJournal.

Another round of stimulus payments may be sent to citizens to help weather the economic impact of the global pandemic that simply won’t retreat.  A decision on when and how much is still going through the political process so it will likely take weeks before a final decision is made. Another round will require financial institutions to staff up call centers and other customer support channels to field inquiries about their deposit. 

The Wall Street Journal reported that the IRS is in a much better position this time to deliver payments quickly. The agency now has account information for millions more individuals than with the first round:

Since the IRS has already assembled the data it needs to deliver the first-stimulus payment, they should be able to deliver a second payment fairly quickly and at a lower administrative cost,” said Jack Smalligan, a former Office of Management and Budget official.

Once Congress reaches an agreement and includes payments in a broader economic-relief package, the IRS and Treasury Department will start preparing to send out the money. The more complex the criteria and the more they differ from the first round, the longer it might take to get payments out.

The first time around, 81 million ACH direct deposit transactions were made and 14 million people used the portal on the IRS website to enter their account information or their prepaid card information so they too could receive a direct deposit. The IRS has retained this account information to expedite the potential second round.

Additional payments were sent through a prepaid card. It was widely reported that some consumers thought the prepaid card was a hoax and threw them away.  Hopefully that doesn’t repeat itself. 

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Get Ready for Another Round of Economic Impact Payments appeared first on PaymentsJournal.

With second quarter behind us, we are now beginning to get an understanding of the health of the payments industry and the initial impact of the global pandemic as banks, processors, and networks begin to report earnings and associated payment activity. Nacha just released its second quarter activity results, giving us insight into ACH. Here’s a summary of some of the key points from their press release. The full press release can be read here.

• There were 6.6 billion payments made on the ACH Network during the quarter, reflecting a 7.9% increase over the same period in 2019. The value of those payments was $14.7 trillion.
• Direct Deposit – up 12% over Q1; and 17% over a year ago
• WEB debit volume is up 15.8% – Consistent with “flight to electronic payments” and the use of online/remote payments
• Check conversion decline of 23.8% – Consistent with flight from checks in all scenarios/use cases

The double-digit direct deposit number is notable since payrolls were way down, but Federal and State benefits like the Economic Impact Payments (EIP), which totaled 114 million transactions and $197 billion through mid-May alone, contributed to that growth, along with the millions of state unemployment and other assistance payments.

The WEB debit volume is up as consumers go digital for purchases and for paying bills. The check conversion is a really interesting number. This means that consumers are using checks less at the point of sale, less for paying bills, and businesses are finding better means of making payments, too, as access to the office and the company checkbook becomes an issue. I suspect that many of these transactions which start off as check transactions do not return once they have been completed electronically.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post What Nacha’s ACH Volume Announcement Tells Us about the Economy appeared first on PaymentsJournal.

The effort required to deliver the hundreds of millions of economic impact payments totaling $267 billion to consumers with very little prep time must have been incredible. Payments averaging $1,680 were sent in the form of ACH direct deposits, checks or government prepaid cards. Here’s the breakdown:

Despite the herculean effort required, it is disappointing to hear from the New York Times that $1.4 Billion or 0.5% was sent to deceased individuals. Probably the most disappointing is that this was a known issue encountered back in 2008 when economic stimulus payments were sent to help with consumer spending during the great recession. A procedure to first run disbursement files to edit for death records was created but not used.  Here’s an excerpt from the Times’ story:

“The agencies faced difficulties delivering payments to some individuals, and faced additional risks related to making improper payments to ineligible individuals, such as decedents, and fraud,” the report said.

The G.A.O., a nonpartisan agency, said that officials at the I.R.S. and the Treasury Department were aware of the risk that payments could end up going to the deceased even as the legislation was being drafted in March. Lawyers at the I.R.S. determined that they could not legally deny payments to people who filed their tax returns in 2018 or 2019, even if they had since died. The improper payments were sent in the first three batches of distributions that went out through the end of April.

Treasury officials told the accountability office that because they were trying to deliver the payments “as rapidly as possible,” they used operational procedures that were last used for sending out stimulus money in 2008. That system did not use death records to prevent money from going to the deceased.

The G.A.O. noted, however, that the I.R.S. had put in place a system in 2013 to update tax accounts with death records to address concerns that tax refunds were improperly going to the dead. Because this control was bypassed to get the stimulus money out faster, “the risk of potentially making improper payments to decedents” increased.

Despite the fact that I.R.S. officials notified Treasury about its initial concerns, a Treasury official in the Office of Tax Policy told the G.A.O. that it was not aware that the money might go to the deceased. Lawyers at the agencies later determined that people should not be sent an economic impact payment if they were dead at the time the payment was made. They determined that would be an “improper payment” under the Payment Integrity Information Act of 2019 and started removing those payments from the system for the fourth batch of money that was to be distributed.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Dead Men Tell No Tales, but They Do Get Economic Impact Payments appeared first on PaymentsJournal.

If, by some chance, you have been reading some of my recent posts, you will know that many of them have been wondering about the fate of the bank branch. My hypothesis is that during the “lockdown” caused by the pandemic, many of the people that used to frequent branches will have found other ways to transact (ATMs or digitally), and some of those will not go back to branches with any regularity.

To carry the hypothesis to its next logical step, depending on the severity of the reduced traffic, banks may rethink their branch strategy and begin closing those branches. I’m am not going to say that I know what the magnitude of this will be or what the long term affect will be.

All that said, I came across some data that gives some perspective to the issue at hand. J.D. Power published their most recent wave of the J.D. Power Financial Services COVIC-19 Pulse Survey^SM. This survey queries American adults on many issues related to the affect the COVID-19 pandemic has had on their financial lives and shows the deep seated concerns that Americans have because of the economic shake-up the pandemic has created. This survey was conducted during the last three days of May this year.

There was one slide from the report that was of particular interest to me. They asked consumers how they would deposit a check.

As the graph clearly demonstrates less than 1 in 10 would visit a teller to deposit a check. In fact, the use of a teller is only more popular than mailing a check in for deposit.  Without context, however, the importance of this chart is lost on many people. Finding context, however, was not hard. In our recently published North American PaymentsInsights ATM Report, North American PaymentsInsights, U.S – ATMs: No Fee for Me we asked two similar questions of consumers in Late  November and early December of 2019. Specifically we asked consumers how they would deposit a $1,000 and $50 check.

These pre-COVID survey results paint a very different picture from the J.D. Power results. Before the pandemic, Americans were most likely to choose to deposit a check, of either value, at a teller in a branch.

These differences are staggering.

Being a bit of a research purist, I understand the issues related to comparing results from different surveys.  There is context effect, sampling difference and more. However, I am compelled to show these results because of the sheer size of the differences. We are talking orders of magnitude difference (five times to six times) here. This is something that cannot be ignored.

As mentioned earlier, I have written several posts for PaymentsJournal on why this is happening and I don’t feel the need to go into those reasons here in great depth.  Suffice to say, we are seeing a significant shift in retail banking and the numbers prove that out.

Overview provided by Peter Reville, Director, Primary Research Services at Mercator Advisory Group.

The post Has the Pandemic Changed the Way We Make Deposits? appeared first on PaymentsJournal.

If your company makes payments, I’m willing to bet you’ve at least Googled cost-effective ways to simplify the process. Perhaps you’re an enterprise making hundreds of payments a day. Or maybe you’re a small- to mid-sized business looking to ease the manual burden on your small-but-plucky AP team.

One of the biggest arguments against checks is that they’re just plain old, invented to support even older banking processes. Of course, the term “old” is relative, so what does it mean when we’re talking about check history? You might be surprised.

Checks used to make a lot of sense

Checks developed alongside banks, with the concept for payment withdrawals based on recorded instruction appearing in history as early as 300 B.C. in India or Rome, depending on who you ask. Paper-based checks made their debut in the Netherlands in the 1500s, and took root in North America about a century before the Declaration of Independence was signed. The oldest surviving checkbook in the U.S. dates back to the late 1700s—and the register even has a notation for a check made out to Alexander Hamilton for legal services.

So, yes, checks are old.

What started as a safe and strategic way to transfer money—one that protected merchants’ safety and livelihoods—ingrained itself in business dealings for hundreds of years. It’s challenging to phase out something like that entirely, even if checks are difficult to adapt to today’s electronic processes.

Hanging onto the past

Each business that holds onto its check process has a reason. Perhaps their AP team’s veteran employees are more comfortable with the familiarity of checks. They may wish to preserve business relationships with suppliers that prefer checks. Some businesses are very likely interested in switching to electronic processes because check payments are expensive—but they hold back due to the perceived process upheaval.

These concerns aren’t unfounded. They’re built upon years—and generations—of business experience. So while plenty of news outlets claim that checks will phase out “soon,” we should more realistically expect that they’ll be incorporated into—not eradicated from—modern business practices. At least for now.

Time for a change

While banks have made efforts to simplify the payee’s ability to cash checks electronically, only a few have attempted to tackle the time-consuming issues that their customers face. They also lack ways to incorporate outdated check processes with the newer ACH and credit card processes their customers are also expected to support.

If checks are here to stay, do companies need to resign themselves to endless signature hunts, letter-stuffing parties, and post office visits? No. Checks have the spectacular ability to evolve as modern needs arise. After all, the first printed checks in the U.S. didn’t have the standardized MICR format that we use today.

Change happens slowly and in easily digestible segments. So although checks aren’t going away any time soon, they’re overdue for another evolution.

A middle ground exists, where business owners can upgrade their processes without causing major supplier or employee upset. Payment automation solutions have been growing in recognition for over a decade. The most successful providers have acknowledged the gray area with checks and incorporated them into their simplified electronic payment workflows. These alternatives reduce AP workloads without forcing suppliers to accept payment types that don’t work for them.

Checks have come a long way since their conceptual days, and their flexibility means we probably won’t see the last of them anytime soon. We are, however, in the midst of their shift into the electronic world, and AP teams are all the happier for it.

Are you interested in the history of wire payments? Check out this article.

The post This is how rooted checks are in our history appeared first on PaymentsJournal.

This referenced posting appears in PaymentsSource and the author, a senior at a fintech offering cash cycle automation, suggests that the pandemic will accelerate the shift away from checks and towards e-payments. In many (if not all) of our recent discussions with industry participants, a clearly defined expectation is the increased digitization of financial processes.  The stark reality of manual process shortcomings has been overtly exposed in the lockdown environment.  The impact seems to be rather sudden in some quarters, as we have commented upon previously in these pages. 

The author briefly tackles the long history of checks and various electronic alternatives (e.g.; the birth EDI file transfers) and key reasons why checks have remained firmly in place in the U.S. as a B2B payments tool. We see inertia as a key underlying reason, which is supported (if one can say that inertia is supported by anything) by the extra friction created for buyers and suppliers by the adoption of certain e-payments, since they all have different standards and relative shortcomings.

‘But coronavirus is different. For quite some time A/R or A/P teams have been looking for systems that match the seamlessness of consumers’ experiences. One study found that 20% of B2B buyers viewed a lack of alternatives as a critical issue for purchases, showing that many firms want more payment options for B2B transactions…The truth, though, is that despite a desire to move toward digital, no payment technology has equally addressed the varying needs that buyers and suppliers have, resulting in slower rates of adoption of digital payments.’

One of the missing factors in any discussion of AP/AR automation is the opportunity cost associated with not using the data available through digital processes.  We believe that this will cause eventual competitive disadvantage given the great AI-related tools now available (and getting better).  The author goes on to point out potential impacts to check delivery by a U.S. Postal Service failure, but one would have to be daft to seriously believe a bailout is not imminent…after all what’s a little $25 billion here and there when we are talking about printing trillions every month? In any event, the digital drumbeat is gaining volume and tempo.

‘Digital payments aren’t perfect and they are not friction-free. Historically, this friction has slowed the adoption of the “next best” payment technology and reverted businesses back to paper checks. But we are already starting to see platforms and payment networks continue to make it easier for buyers and suppliers to use digital payments without needing to change current methods or compromise their needs. These innovations will continue to erase friction and raise the value of digital payments, especially as it pertains to the never more important need to ensure cash flows efficiently. And adoption will follow suit…Like many things occurring during the crisis, the paper check’s shortcomings have been amplified. While checks may not completely disappear, the pandemic has forced companies to look at how operations can be digitized and automated. For these reasons, the paper check may be easier to write off this time around.’

Overview provided by Steve Murphy, Director, Commercial & Enterprise Payments Advisory Group at Mercator Advisory Group.

The post Coronavirus is Speeding Checks’ Demise appeared first on PaymentsJournal.

This week, the U.S. Treasury Department began sending out economic impact – or stimulus – payments, in response to the COVID-19 pandemic. However, some people may have to wait weeks or months to receive their payments by mail. With its Trans@ct by 7-Eleven^® Prepaid Mastercard^®, 7-Eleven, Inc. provides a convenient solution to under- and un-banked individuals and families to help them receive these much-needed funds faster¹ than a paper check.

The Trans@ct by 7-Eleven® Prepaid Mastercard® offers cardholders an alternative to brick-and-mortar banks, and can receive direct deposit payments such as government benefits or paychecks. After registration and activation, all funds loaded onto Trans@ct by 7-Eleven card accounts are FDIC-insured. To facilitate stimulus payments, the U.S. Treasury Department is setting up a web portal to allow individuals to update their direct deposit information.* The web portal will be available as early as this week, and Trans@ct by 7-Eleven cardholders can update their account information to receive their stimulus checks via direct deposit sooner, rather than waiting to receive the payments in the mail.

“7-Eleven continues to look for ways to help our customers as they face hardships brought on by the COVID-19 pandemic,” said 7-Eleven President and CEO Joe DePinto. “We know a large number of Americans will need access to their checks as soon as possible, and we want to meet that need.”

Customers can purchase a Trans@ct by 7-Eleven card at participating 7-Eleven® stores, or they can apply online at https://www.transact711.com/. After customers complete enrollment, they will receive account information that can be used to update direct deposit information.

Here are some of the benefits of the Trans@ct by 7-Eleven® Prepaid Mastercard®.

• Reloadable – Money can be loaded onto the card at any 7-Eleven store.²
• No cost ATM – Cash withdrawals at Allpoint Network ATMs in 7-Eleven stores, or any ATM with a Trans@ct by 7-Eleven logo, are fee-free.³
• Shop – Use wherever Debit Mastercard is accepted – online, over the phone and in stores.
• Mobile app – Access account information in the Trans@ct by 7-Eleven Mobile App or in the Online Account Center, and track spending, check deposits and account balance.⁴
• Bill pay – Pay bills using the Trans@ct by 7-Eleven Mobile App, online at www.transact711.com, as well as at any 7-Eleven store.⁵
• Load checks with phone – Use iPhone or Android smartphone camera to load checks onto the card account with the Mobile App.⁶
• Text alerts – Anytime Alerts™ can be set up to send a text or email after every transaction.⁴
• Earn rewards – Regular use of a Trans@ct by 7-Eleven account earns waived fees and 7Rewards® loyalty program members can link their account to the Trans@ct by 7-Eleven card to earn points that can be redeemed for 7-Eleven merchandise.

¹ Faster access claim is based on comparison of a disbursement via direct deposit vs. disbursement via a mailed paper check. For further information, visit www.irs.gov/coronavirus/economic-impact-payments.

² Fee may be assessed by reload location and may vary from location to location.

³ There is no cost for ATM transactions performed at Allpoint or Trans@ct ATMs at participating 7-Eleven locations. Look for the Allpoint or Trans@ct logo or visit www.Transact711.com for a list of participating 7-Eleven locations. A $2.50 fee applies for each cash withdrawal made at all other domestic ATMs, plus the ATM operator’s fee, which may vary from ATM to ATM. There are other costs, terms, and conditions associated with the use and reloading of this Card Account.

⁴ We do not charge for this service, but your wireless carrier may charge for messages or data.

⁵ Bill payments may be subject to fee. Details about bill payment methods are available in the Online Account Center.

⁶ Mobile Check Load is a service provided by First Century Bank, N.A. and Ingo Money, Inc., subject to the First Century Bank and Ingo Money Terms and Conditions, and Privacy Policy. Approval review usually takes 3 to 5 minutes but can take up to one hour. All checks are subject to approval for funding in Ingo Money’s sole discretion. Fees apply for approved Money in Minutes transactions funded to your card. Unapproved checks will not be funded to your card. Ingo Money reserves the right to recover losses resulting from illegal or fraudulent use of the Ingo Money Service. Your wireless carrier may charge a fee for message and data usage. Additional transaction fees, costs, terms and conditions may be associated with the funding and use of your card. See your Cardholder Agreement for details.

*For more information on the stimulus payments, visit www.irs.gov/coronavirus/economic-impact-payments

The post Trans@ct By 7-Eleven® Prepaid Mastercard® Can Help Unbanked Receive Stimulus Payments Sooner¹ Than a Paper Check With Direct Deposit appeared first on PaymentsJournal.

Forbes announced the federal government’s solution to capture direct deposit information from citizens who don’t file taxes or don’t receive social security.  This will help to speed up the delivery of the Economic Impact Payment to individuals and decrease the number of checks in the mail.  Financial institutions may want to share this information with their customers and members:

Go to IRS.gov, which is the official website of the Internal Revenue Service (IRS).

Access the link that says: “Non-Filers: Enter Payment Info Here.”

You will be taken to Free File Fillable Forms, which a safe and secure IRS partner website.

Create an account with an email address and phone number.

Add your filing information (Single or Married filing jointly)

Add your personal information, including a valid Social Security Number

Check the box if someone can claim you or your spouse as a dependent.

If you want to be paid electronically, enter your bank information. Otherwise, you will receive a paper check in the mail.

You will be asked to verify your information with a driver’s license or state identification. If you don’t have either, you can leave this section blank.

Free Fillable Forms will send you an email confirmation that you’re all set, or whether you need to correct any errors. Once completed, Free Fillable Forms will file a Form 1040 and submit it to the IRS for you.

Here’s the official IRS website: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

It is to be expected that scammers, who are spending more time at home like many of us, will take the opportunity to try and spoof the IRS website and grab consumer’s account details.

In the meantime, those who already have their information with the IRS have begun to receive their payments.  Here’s the current schedule for the payments which extends through September:

Stimulus checks started going out on April 9, 2020. If you filed your income taxes in 2018 or 2019 and provided your direct deposit information to the IRS, your stimulus check could be sent today. Estimated arrival time in your bank account could be on or before April 14, 2020.

The IRS will start sending paper stimulus checks to taxpayers with the lowest annual adjusted gross income first for taxpayers who filed taxes:

April 24: less than $10,000

May 1: $10,001 – $20,000

May 8: $20,001 and $30,000.

May – September: in order from lowest income to highest income based on 2018 or 2019 tax information.

September 4: any remaining checks, such as to married couples making $198,000 (the maximum joint income that is eligible to receive a stimulus check).

September 11: checks to those who didn’t provide contact information to the IRS.

Overview provided by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.

For the original article quoted in this coverage please click here.

The post The IRS Begins to Collect Direct Deposit Information appeared first on PaymentsJournal.

Much, MUCH attention has been given to how benefits from the federal government’s CARES Act will be distributed. Since many individuals will receive this payment—and others, such as unemployment insurance—though a paper check, it may be weeks before some receive their money. Though it is difficult to change processes inside massive government operations while meeting the needs of all citizens, this current pandemic underscores the benefits of electronic payments. 

Speed matters here. The current environment is the best illustration of the value of electronic payments and, hopefully, will be the impetus that government entities are looking for to prioritize an improvement in quickly and safely delivering funds to their constituencies. The financial benefit of electronic payments over paper payments already exists, and has been understood for years.

This article in PaymentsSource looks into the struggle of trying to change a payment process in the midst of the current chaos:   

Fintech companies see big opportunities to help the government connect consumers and small businesses and banks with funds, but many gaps stand in the way, said Jareau Wadé, vice president of growth at Finix, a San Francisco-based payments software infrastructure provider that launched in 2015.

“A lot of fintechs want to be involved in helping disburse government funds, but they can’t because they’re not banks. And a lot of banks who could help are choosing not to, because they’ve decided it’s not worth it,” Wadé
said.

The government’s best option might be testing an approach that offers consumers several options for receiving funds.

“Ideally, consumers could go to a central location and pick any number of different disbursement options and there might be some complications with fraud and ID, but it would still be better to get funds out quickly, especially to the millions of people who are underbanked. There are more underbanked people operating in cash than most people realize,” Wadé said.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Rethinking Government Disbursements appeared first on PaymentsJournal.

Like many in the payments industry, I have been trying to understand the enormous undertaking of getting the trillions of dollars in stimulus money into the hands of consumers. 

The story keeps changing depending upon the source, and some sources even contradict themselves. A CNN report is now stating that based on the time it takes to create and mail checks, some individuals won’t see their deposit for months.

Here’s what some of the Treasury’s most recent statements revealed in a question and answer format:

How will the IRS know where to send my payment?

The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

I am not typically required to file a tax return. Can I still receive my payment?

Yes. The IRS will use the information on the Form SSA-1099 or Form RRB-1099 to generate Economic Impact Payments to recipients of benefits reflected in the Form SSA-1099 or Form RRB-1099 who are not required to file a tax return and did not file a return for 2018 or 2019. This includes senior citizens, Social Security recipients and railroad retirees who are not otherwise required to file a tax return.

Based primarily on the Treasury’s press releases and statements, here’s what seems to be reliable background.  Of course, this is an unprecedented effort, so I’ll update as more becomes known:

• An estimated 150 million stimulus payments will be distributed.
• Those who filed taxes for 2019 already or filed in 2018 and included their checking account information on those returns will receive an ACH direct deposit beginning as soon as next week. 
• Those who receive social security benefits automatically but don’t file taxes will also receive automatic deposits into their account. 
• The estimated number of those receiving an ACH deposit is in the range of 50-60 million. 

What we don’t know: 

• Will those who receive social security benefits on a Direct Express prepaid card receive funds through an automatic deposit too? 
• Who is going to deal with all of the returned transactions from closed checking accounts?  Will those get sent as a check?
• If an individual does not file taxes and does not receive social security, how will they receive funds?

The government can reportedly issue about 5 million checks a week.  That means the remaining 90-100 million checks will go out over an 18-20 week period.

This comes with its own unanswered questions:

• Can’t additional check writing facilities be brought in to help get checks printed faster?
• How will those who don’t use ATMs or remote deposit capture supposed to cash these checks?

Undoubtedly, you have heard that many have approached Treasury with new options for delivering funds electronically, but there’s no word on whether any of these options are a real consideration right now. 

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Trying to Make Sense of the Government Stimulus Payments Process appeared first on PaymentsJournal.

In response to the COVID-19 outbreak, the U.S. government is contemplating sending Americans $1,000 to help ease the financial burden they are facing because of this crisis. I won’t get into the political arguments on either side of this decision.  What I would like to talk about is what happens when the money arrives. 

Chances are that if this money is disbursed, it will be in the form of a paper check mailed to people’s home.  The IRS and other agencies do have the capability to electronically transfer funds, but those all require consumers to register and provide information that gives the government email addresses, account information, and an authentication method. 

The federal government certainly does not have all of this information for all its citizens, and in the 2008 crisis some people received their check this way.  That leaves the paper check for many Americans.

What happens when the letter carrier delivers the check to millions of doorsteps, particularly in the era of self-imposed (or not self-imposed) shelter in place protocols and social distancing?

What came to mind is how people will get the funds from that paper check into their financial institution’s account. There are three primary methods for depositing checks in the U.S. – at a branch, at an ATM, and through remote capture via a mobile banking app.

Our most recent PaymentsInsights survey asked American adults about how they would deposit a $1,000 check (note: this survey was conducted in November, pre-COVID-19).  Our data show that there are meaningful differences in the methods people choose in making a $1,000 check deposit. The biggest differences we see are related to age and annual household income.

As the chart below shows, 7 in 10 (68%) of consumers 65 years of age or older would prefer to use a teller to deposit a $1,000 check. Some of these people will be able to switch to another method of depositing this check, but others will not. Many older Americans have eschewed technological options for banking in favor of the method they know the best – and that does not bode well for them getting the money into their bank.

Similar results can be found when we compare the survey question among income levels. Preference to visit to a physical bank with a teller interaction is highest among those who are in the lower income brackets.

While these data points were collected before COVID-19, it points to a need that may develop among older and lower income adults on how they will get the government money into their bank accounts. Yes, many bank branches remain open and ATMs still work for these people, but will they feel safe (in its broadest definition) using these channels in light of the current situation? Some will, some won’t.

That leads me to ask, what can the financial services industry do to help these people, who probably need this $1,000 the most, get the money into their accounts?

Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group

The post Depositing a Check in the Age of Shelter in Place appeared first on PaymentsJournal.

Check use is in decline, particularly with consumer payments.  We know this, as it has been well documented. An article in PaymentsSource provides a more detailed analysis based on data released with the Federal Reserve’s most recent payment study.  This can guide where to focus attention when looking to replace checks with a more efficient electronic transaction.  Here’s one example of the analysis:

The biggest threats to the long-term viability of paper checks have been a combination of the attractiveness of debit and prepaid cards in-stores and the shift in consumer shopping habits to e-commerce.

Transactional interchange has always been a lucrative driver for banks to promote debit card usage among consumers, even after a rate cap imposed by the Durbin amendment took effect in 2011. Debit card usage has grown from 8.3 billion transactions in 2000 to 72.7 billion transactions in 2018, according to the Federal Reserve. Similarly, prepaid cards have gone from just 500 million transactions in 2000 to 13.8 billion transactions in 2018 — almost matching the number of check transactions.

Since e-commerce largely precludes cash and checks, it’s been the realm of payment cards including debit and card. In the fourth quarter of 2019, e-commerce accounted for 11.4% of total retail sales according to the U.S. Department of Commerce. E-commerce sales grew 16.7% in the fourth quarter of 2019 compared to total overall retail sales growth of just 3.8% for the quarter in comparison to the same quarter in 2018.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

The post Tracking the Vulnerability of Checks appeared first on PaymentsJournal.