For decades, the check was the preferred method of payment for both individuals and businesses. In today’s technological age, checks are becoming more and more outdated. As technology continues to improve every year, there are fewer and fewer opportunities for people and businesses to utilize checks. What happened to checks and why are they quickly disappearing from use?
In the past, banks had to physically transport checks around the country to settle transactions. That meant that a combination of trucks and planes delivering paper checks was a daily occurrence. It was painfully inefficient and added to the cost of banking for everyone. In 2001, the Check 21 Act was passed, which made it legal to settle checks between banks with a digital image of the check. Banks began switching to this method almost immediately and today it makes up the vast majority of transactions in the banking industry.
Online Payment Methods
Another factor that is contributing to the death of the paper check is the abundance of online payment methods available to people today. These online payment methods make it possible for you to make a payment for goods and services instantly and with minimal effort. When you can click a button on your computer and buy what you want instead of writing out and mailing a physical paper check, why wouldn’t you take that approach?
One of the first instances of this technology going mainstream was Paypal with Ebay. In the early days of Ebay, people had to use inefficient online payment methods of mail a physical check to the seller. Sellers had to hope that they would receive payment and wait days for a payment to clear. This slowed down the time that it took to complete a transaction and caused numerous problems. Paypal went after the power sellers on Ebay as their first niche market and it turned out to be a major success. Today, Paypal is commonly used to buy goods and services all across the web.
The availability of virtual currencies are also expediting the death of the paper check. Currencies like Bitcoin make it possible to transfer money digitally and anonymously almost instantly to anyone in the world. All you need is the Bitcoin wallet information of the user and you can immediately transfer any amount of money to them. It is extremely convenient and makes it possible to avoid large fees for making online transfers. One of the current drawbacks of using virtual currencies is that they are not as widely used as options like Paypal. However, millions of users are being added to their ranks every single year. Another advantage that these currencies possess is that they contain a fixed amount of units. This means that central banks cannot alter the available amount of currency and devalue everyone else’s currency units. As banks become more familiar with Bitcoin and other virtual currencies, it will make them more common in the online payment industry.
In the past, getting your paycheck was a regular routine that almost everyone looked forward to. Now with many businesses utilizing virtual bookkeeping services and direct deposit, that is mostly a thing of the past. Once you get hired for a new job, the employer will gather your banking information and set you up to receive direct deposits every time you get paid. The money is simply deposited directly into your bank account without the need for a check every being printed. In many cases, the pay stub is emailed directly to the user before the direct deposit goes through. This makes it extremely convenient for both the employer and the employee in this type of transaction.
While there are still occasionally situations that call for a paper check, those situations are becoming fewer and farther between. In the near future, paper checks will be a thing of the past and a relic of a simpler time.