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<p>You may have seen some of these recent headlines: “Fed study reveals check use plummeting” “Surprise! Check may not be in the mail” “Check writing seen as thing of the past” The headlines and accompanying stories explained findings of the first Federal Reserve study of the U.S. payments system in more than two decades. A news release from the Federal Reserve stated: “New data suggest check writing in the U.S. is steadily giving way to electronic forms of payment as consumers, businesses, and financial institutions seek to be more efficient and cost-effective.” The Fed study – based on the responses of nearly 1,300 financial institutions and another 89 electronic payment processors – stated that checks have declined from about 85% of non-cash payments since the last study in 1979, to about 60% in 2001. Behind the headlines While there’s no question that electronic payment forms, such as credit cards, debit cards, Internet banking and the Automated Clearing House (ACH), are more popular than ever and have experienced strong growth, the prediction of the check’s impending demise may be greatly exaggerated. A drop off in check use may have captured headlines, but a closer look at the Fed Study reveals the check to be remarkably resilient: Overall check usage has increased 55% since 1979, and despite the influence of electronic payment systems, checks remain the first choice among U.S. consumers. Of the 80 billion non-cash retail payments made each year, some 50 billion are made by check. Check use is still increasing at a rate of between 1% and 3% per year. Today, 87% of U.S. adults have a checking account. $48 trillion travels through the monetary system by checks and only $7 trillion through all other electronic payment systems combined. This means that of the $55 trillion combination of checks and electronic payments, 86% is attributable to the check. The amount of money that’s attributed to checks has nearly doubled – from $24 trillion in 1979 to nearly $48 trillion today. A check is 67% more likely to be used than all electronic payments combined. In other words, even with many other options available, consumers still choose the check. It remains the dominant form of non-cash payment. Consumers continue to favor checks for record keeping, budgeting, person-to-person payments, convenience and familiarity. A matter of choice What does all this mean to your credit union? It means that your members like to have choices. Many like the convenience of Internet banking and bill pay. But that doesn’t mean they don’t like the check. In fact, the checking account remains a huge factor in building member relationships and creating significant value for your credit union. Here’s how: The checking account helps establish the primary financial institution (PFI) relationship. CUNA research indicates most credit union members consider their PFI to be the location of their checking account, and members will buy more products and services and borrow more money from their PFI. The checking account provides a solid source for low-cost funds. Increasing your checking account base leverages the fixed costs of branches and your back-office operations. If you can double the number of checking accounts, you can cut your fixed costs per account in half. The Federal Reserve itself is investing significant resources in the future of the check by, “redesigning its infrastructure for providing both paper and electronic check services.” The Check Modernization initiative is a “comprehensive strategy to standardize and reengineer our check infrastructure over the next several years.” Why the investment? Here’s the Federal Reserve’s explanation: “Twenty years ago, many predicted that paper checks would by now become obsolete. We now know that – despite all the technological advances – the power of consumer preferences has resulted in a very different outcome. Paper checks are likely to continue as a dominant form of consumer payments, which means we need to develop more efficient ways to clear checks than the traditional sorting and delivery of paper.” (Source: the Federal Reserve’s Financial Services Web site: www.frbservices.org). The check going away? Well, let’s let another headline help answer that question: “Check Writing Seen Being Reduced in Foreseeable Future” The headline was featured in the Wall Street Journal. The date: Feb. 10, 1966. The lesson: More than 36 years later, you can’t count out the check. Just ask your members.</p>

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