For many years, we’ve been told that paper checks are no longer necessary because of people’s changing payment habits. But despite what some may think, paper checks are still an important part of the payments landscape – and for four critical reasons. These four reasons include increasing fraud levels, lower costs of person-to-person handling payments, easier reconciliation, and easy person-to-person payments.
1. Help Reduce Fraud
As the world of payments becomes increasingly digital, fraudsters find it easier to intercept and manipulate data, such as credit card and debit card information.
Security experts have long said that while most consumers still interact with a paper check, money taken in person is largely accepted as being of higher value. Because a U.S. Treasury check can be cashed immediately, it’s ideal for people (such as store owners) who need to verify payment to a third party quickly.
2. Cost Less to Handle Than Other Forms of Payment
When the U.S. dollar was still backed by gold, each bill’s value resided in the Federal Reserve’s gold reserves. The cost of handling the paper currency was reduced by 99 percent, which was much cheaper to process.
In other countries, however, they still had to deal with the physical nature of the paper currency. While those costs were eliminated in the U.S. in the 1930s, companies still use checks and are stuck with those expenses.
This also means that bank customers can expect lower fees on paper checks – and as a result, they’re more likely to use this form of payment.
3. Easier to Reconcile
While most paper checks are now electronic, they’re still manually processed and hand-inspected before being sent.
Paper checks are currently being used because they’re faster to process than other forms of payment and because of the physical nature of the paper check itself.
But despite the manual processing, having to ship paper checks is considered better than the alternative of not sending them at all. By sending paper checks, companies can verify that they’ve received payment – and beyond that, it’s easier to track and reconcile data.
4. Easy Person-to-Person Payments
In addition to the companies that send paper checks, there’s also a growing number of individuals who still use paper checks as a way to make person-to-person payments.
These people may be less affluent and may not have access to a wire transfer service like Western Union. But by sending an individual check to someone who needs help, the act of giving is valued in our society.
Because of this, paper checks can be used to help connect people who may not otherwise be able to help each other.
The use of paper checks is likely to continue for at least another 20 years. As people continue to use paper checks, they’ll continue to depend on them as a secure payment method.
It may not be as convenient as a digital payment system, but the U.S. can still be proud of its paper check tradition.