Checks vs Credit Cards for Payments

Why are checks still so widely used for payments when the US has some of the most advanced online shopping systems in the world where you can buy virtually anything with a credit card?
Expert answer by Alex Gerard,
10+ years experience in banking consulting

Why are checks still used so much in the US although there
are lots of safety issues related to checks?

This question is about technology adoption and lifecycle – paper checks are very similar to other old technology with a mass adoption. I see the following reasons for the paper checks domination in the US.

Looking from the Banks Perspective

Banks made big investments into check payments infrastructure in the past and are willing to use this technology as long as possible (as long as government regulation and customers will allow them to). Any potential fraud risks are cheaper to hedge, than implementing a new infrastructure for paperless payments.

More and more investments go into this old technology - most mobile banking apps implemented electronic check deposit feature and ATMs are getting upgraded with new models that read paper checks.

From Customers Perspective

There is no other free option available to transfer funds. Wire transfers usually have fees; third party electronic payment options (PayPal and others) also have fees and limitations.

 A good example showing that the banks are not willing to innovate is the situation with the P2P industry – 5 major banks formed a ClearXChangepayment network back in 2011, but is it still invisible to most of the customers – banks are extremely slow in making it functional for real use.

What are the biggest safety concerns and problems related to checks?

Checks can bounce – i.e. there is not enough funds on the account, This is a frustration for both parties – when writing a check you need to know the funds available, as a receiver you need to know that the check is backed by the money.

Any predictions how long will the checks still be around in
the US?

It looks like until the government will push the industry towards a new technology the situation will remain the same. Another possible outcome is that a disruptor from the technology sector will turn the industry upside down. We see a big interest from the Silicon Valley companies in payments (Facebook payments, Apple pay and others).

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