A ‘Hard Core’ of Check Users Likely to Resist Inducements to Convert to E-Payments

For years, the growth of electronic payments has been fueled by the conversion of check writers into card users at the point of sale, but now those days may be coming to an end. Research, as well as the experience of one major retail chain, indicates the check writers who remain are likely to continue writing checks. “They’re the hard core of the hard core, the last ones left,” said Paul McAdam, senior vice president for enterprise strategy at processor Fidelity National Information Services Inc.

That core is a relatively small but hardy breed. Some 11% of consumers say paper checks are their primary method of payment in stores, according to research McAdam presented on Tuesday at a payments conference in Baltimore. This consumer segment accounts for 45% of point-of-sale checks. By contrast, 34% of consumers cite debit cards as the instrument they use the most at the point of sale, followed by cash (27%), credit cards (26%), and a group FIS calls “Innovators,” or users of contactless or mobile payments (2%).

Some check users might be induced to use debit cards, McAdam argued, since 41% said they’d start using the plastic if retailers stopped accepting checks. But this group’s fidelity to paper will be hard to overcome. While check volume is expected to continue to drop, the decline will be slow. About 91% of the check writers say they expect their usage to remain the same over the coming year, while 2% say they will write more checks, according to FIS’s research.

Even carrots and sticks may not work. Asked whether they’d write fewer checks if their bank charged a dime per item, only 30% of the “hard core” check writers said they’d use checks less often. Just 24% would write fewer checks if they could earn rewards for credit or debit card usage, according to the research. “Eighteen percent said, ‘There’s nothing you can do to persuade me to write fewer checks,’” said McAdam.

Daphne Gilliam, ACH/check product manager at Wal-Mart Stores Inc., agreed there isn’t much more merchants can do to convert remaining check writers to electronic methods. “There are committed check writers, they aren’t going anywhere,” she told the audience at the conference, which was sponsored by NACHA, the rules-setting organization for the automated clearing house network. Indeed, she says, Wal-Mart doesn’t try to convince check-using customers to stop writing checks. Instead, it adopted several years ago a chainwide program of converting paper checks to e-checks using the ACH’s POP application. Even former check users continue to carry a checkbook with them, Gilliam said, a lesson Wal-Mart learned recently during an outage at its card processor. Check usage spiked up, she said.

To be sure, checks as a percentage of overall transactions at Wal-Mart have declined steadily for years as customers started using cards, Gilliam said without disclosing numbers. But she adds that in the current fiscal year, for the first time, that decline may flatten out. “What we have now is hard-core, committed check writers,” she said.

A number of factors account for this strong attachment to paper. Gilliam tells Digital Transactions News that check writers at Wal-Mart tend to be persons on fixed incomes who are “glued” to checks because they like the float they offer (though methods like the ACH and image exchange have reduced float significantly in recent years). They also like the paper-based but simple record-keeping function of a check register, she says. “Keeping track of spending is really a big issue” with this group, McAdam added. Still, when asked if they would use checks less often if they were offered an electronic method of record-keeping, just 30% said they would, he said.

As a group, the committed check writers tend to skew older, though only one-third are over 65. Most keep their accounts at credit unions and community banks, and use checks most often at grocery stores (32%) and discount/super-center stores (24%). Interestingly, though as a group check writers would prefer debit cards in cases where checks aren’t accepted, some 88% of the group also used credit cards.