Magazine article American Banker

Fed Says Decline in Check Volume Is Gaining Speed

Magazine article American Banker

Fed Says Decline in Check Volume Is Gaining Speed

Article excerpt

The Federal Reserve banks are likely to accelerate their plans to shutter check processing facilities in response to the increasing drop-off in check use, and commercial banks may follow suit, according to a Fed executive.

"The pace of decline in paper checks, what we call legacy checks, is going to continue if not accelerate," said Richard R. Oliver, an executive vice president at the Federal Reserve Bank of Atlanta and the manager of the Fed's Retail Payments Office, said in an interview Tuesday. "We have to continue to accelerate the downsizing of our paper processing infrastructure."

According to a study the Federal Reserve Board's Financial Services Policy Committee released Tuesday, nearly half the checks written in 2006 were sent from consumers to businesses, either as remittances, such as utility payments, or at the point of sale.

About 30.6 million checks were processed that year, and more than 15 million were eligible for conversion to automated clearing house transactions, Mr. Oliver said.

The Fed reported in December that 2.6 million checks were converted to ACH transactions in 2006, but the use of check conversion formats has grown dramatically since then, as have other electronic payment options.

Tony Hayes, a partner in Marsh & McLennan Cos.' Oliver Wyman Financial Services, said that consumer-to-business checks "is the category of checks that is declining by far the most quickly." Not only are billers turning more checks into ACH files, but consumers also are using checks less often at the point of sale and to pay their bills, he said. …

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