Checks may be getting an extended life now that financial institutions are developing and rolling out mobile remote deposit capture technology as part of their mobile banking applications, observers said.
Growing interest in the technology, which lets customers deposit checks using images captured by cameras on their smartphones, has sparked a debate over whether it might help stall the rapid decline in check use.
"Check volume is declining, but why would it decline if [banks] make it really easy to deposit" checks, said Nicole Sturgill, the research director for delivery channels at TowerGroup.
Last month, JPMorgan Chase & Co. became the first major U.S. financial institution to offer mobile remote deposit capture. USAA Federal Savings Bank had earlier rolled out a similar service.
The latest Federal Reserve data suggests that the number of checks paid fell by 6.4% per year from 2003 to 2006, for a total decline of 6.7 billion checks, from 37.3 billion to 30.6 billion.
The number of checks paid differs from the number of checks written because billers and merchants increasingly use the automated clearing house system to convert checks into electronic payments. The number of checks written slipped 4.1% per year for a total decrease of 4.5 billion, from 37.6 billion to 33.1 billion, the Fed data shows.
The Fed said it expects to release updated check numbers this year.
More recent trends suggest check use is down across the board.
More than 25 states, for example, use prepaid debit cards instead of checks to disburse unemployment benefits, and retailers have ditched paper checks and gift certificates in favor of prepaid cards for rebates.
A recent Synergistics Research Corp. consumer survey found 28% of the 1,003 respondents paid their bills with checks, compared with 75% who used online bill-payment services.
Another online survey, from the Auriemma Consulting Group, found 46% of 500 respondents using checks less often.
Sturgill described mobile remote deposit capture as a viable technology that could keep consumers using checks as a payment method. But "if we want to get rid of them, [banks] need to be looking at other options and not remote deposit capture," she said.
JPMorgan Chase said it views the technology as a way to give its customers more choices for doing their banking.
Bluepoint Solutions, which develops mobile remote deposit capture services for community banks and credit unions, said it views the technology as something that will help banks save costs associated with check processing.
Mobile remote deposit capture helps banks start processing checks without the branch traffic and assists with fraud protection, said Andrew Tilbury, a Bluepoint spokesman. "All those things are going to drive the cost of a check down," he said.
Check volume continues to decline, but processing costs are still rising, Tilbury said, though he was unable to give specific data.
Christine Barry, a research director at Aite Group, said check use will probably not grow along with the rise of mobile remote deposit capture. People might be hesitant to use the technology because some may view the mobile phone as a device vulnerable to fraud, she said.
Financial institutions also should keep wary of potential fraud as they consider and roll out mobile remote deposit capture, she said. "If it's not implemented properly, it's going to open up the door for check fraud," Barry said.
