So, Why Do Consumers Still Write Checks?

While some time-short consumers are turning to automatic payment systems, most still go through the time-consuming process of writing checks. The following quotation makes the point. "Although the checkless society has been predicted for decades, checks remain the most frequently used noncash payment method in the U.S., contrary to trends in a number of other countries." The quotation is from an article by Brian Manter, "Why Do Consumers Pay Bills Electronically? An Empirical Analysis," in Economic Perspective (4th quarter, 2000) published by the Federal Reserve Bank of Chicago. The accompanying table provides excerpts from the data to which Manter refers.

In some sense, an implicit question in the paper is: "Why do consumers continue to pay bills primarily with checks when there are more time-saving and less costly methods of payment?" As shown in the accompanying table, payments by check continue to dominate the payment system in spite of other "modern" ways of paying bills. Given the growing importance of payment-related revenues to financial institutions, they have a major interest in participating in increasing the value of their payment systems to consumers and in developing legislation that will meet consumers' needs as well as their own. Consumers' varying desires for "control" of their payments include their perceived need to "review bills, initiate payments and have errors resolved." While industry may view these requirements as illogical in view of the achievements of modern technology, they cannot be ignored in the process of designing "modern" means of bill paying.

Legislative standards that are sufficiently rigorous to satisfy the most nervous consumer or zealous legislator may require a payment system so costly that consumers will not pay for the service. To complicate policy issues even further, Manter's research shows that consumers' concerns about the various features of payments services vary notably with their income and other characteristics. His final message is that the industry should recognize that consumers are normally resistant to change. His conclusion: "the next stage of migration towards electronic bill payment may be more dependent on establishing the business cases to justify investment in new product features that address consumer preferences than on overcoming consumer resistance to change."