Top-Level Takeaways
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Debit card transactions have largely supplanted paper check use.
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Credit unions adjust while continuing to serve both channels.
Paper checks, like the branch tellers who take them, have long been considered on the endangered species list. In reality, however, checks still garner a lot of use.
“A significant portion of our membership and the companies they do business with still use checks,” says Chet Kimmell, president and CEO of Neighborhood Credit Union ($630.1M, Dallas, TX). “Checks aren’t dead. But, they are on life support.”
And despite the fact checks are an “outmoded method of transferring funds,” Kimmel expects this to be the case for years to come.
Checks Are Checking Out
There’s little doubt that paper check use has diminished sharply. The Federal Reserve once processed checks at 45 centers around the country. That dropped to one in 2010, six years after Check 21 became law and allowed for “substitute checks” and electronic processing.
According to a payments study the Fed released this summer:
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In 2015, households wrote 7.1 checks per month, on average. That’s 36.9% of the 19.3 checks per month they wrote in 2000.
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In 2015, checks accounted for 13.4% of non-cash payments and 15.4% of the value of non-cash payments. In 2000, that was 57.8% and 66.7%, respectively.
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In 2015, households made 78.6 non-cash payments per month, on average. That’s approximately 94.7% more than the 40.3 in 2000.
Also see: Second phase of ACH same-day push adds debit to the mix.
The drop in paper checks has been part of a digital revolution that coalesced with emerging generations ― and boomers ― who embraced new ways to pay and be paid.
CU QUICK FACTS
Neighborhood Credit Union
Data as of 06.30.17
HQ: Dallas, TX
ASSETS: $630.1M
MEMBERS: 48,676
BRANCHES: 11
12-MO SHARE GROWTH: 6.8%
12-MO LOAN GROWTH: 14.0%
ROA: 0.98%
There is, however, an observable difference about the people who prefer pen and ledger.
The Generation Gap
“Paper checks still represent a muscle memory for legacy generations,” says Josh McAfee, vice president of marketing at MAX Credit Union ($1.3B, Montgomery, AL). “Many check-writers take pride in their record-keeping diligence and view their payment choice as emblematic of a simpler, more modest era in spending.”
It’s reasonable to assume that muscle memory occurs in primarily older members.
“Millennials are more apt to choose an electronic payment,” says Shari Jones, vice president of check services at State Employees’ Credit Union ($36.9B, Raleigh, NC). “The previous generations might opt for paper check payment.”
CU QUICK FACTS
State Employees' Credit Union
Data as of 06.30.17
HQ: Raleigh, NC
ASSETS: $36.9B
MEMBERS: 2,251,069
BRANCHES: 260
12-MO SHARE GROWTH: 9.3%
12-MO LOAN GROWTH: 9.0%
ROA: 0.75%
Although there is a noticeable generation gap, evolving technology is helping older generations step into new payment methods.
“Checks are primarily being used by older members,” Kimmell says. “But a significant portion of our membership uses remote deposit capture to turn a paper check into an electronic transaction.”
The younger members at McAfee’s Alabama credit union cite security and convenience as factors in their preference for digital channels. But whereas paper checks are immune, for the most part, to data breaches, they also require tracking transactions on paper.
CU QUICK FACTS
MAX Credit Union
Data as of 06.30.17
HQ: Montgomery, AL
ASSETS: $1.3B
MEMBERS: 106,766
BRANCHES: 15
12-MO SHARE GROWTH: 8.7%
12-MO LOAN GROWTH: 7.0%
ROA: 0.69%
“Check settlement requires more-active management of one’s account balance,” McAfee says. “For many of our younger consumers, paper checks present a potential financial fail-point.”
National Trends Highlight Local Choices
SECU and its more than 2 million members were part of the Fed study, and Jones says the credit union’s numbers are on par with the national experience. That means members at SECU have also demonstrated a sharp shift to debit.
From 2008 to 2016, ACH volume at the nation’s second-largest credit union grew by 67.5%, and debit card volume jumped 145%. During those same eight years, checking accounts grew by 165% at SECU, meaning checking accounts are growing but check use isn’t.