How to Remove $1 Trillion of Checks From the Economy

Checks are an attractive fraud vector for criminals, and a source of serious concern for financial institution executives. Can technology help financial institutions reduce check issuance or processing? 

While checks have steadily declined since 2018, there were still 11.2 billion checks processed in 2021, according to the 2022 Federal Reserve Payments Study. At the same time, check fraud remains a significant concern for financial institution executives: 80% of respondents to Bank Director’s 2024 Technology Survey, sponsored by Jack Henry & Associates, said check fraud is the type of fraud that concerned them the most. Check fraud even merited an area of special focus in the U.S. Treasury Department’s 2024 National Money Laundering Risk Assessment.

“We all know today that check fraud is prevalent, and it’s happening every single day,” says Shai Stern, CEO of CheckAlt, an independent provider of lockbox and treasury solutions. He speaks in the October 2024 episode of FinXTech’s Reinventing Banking. “These crooks know when they’re looking for — bill pay checks — and they’re looking to go ahead and steal them without a question.”

One major driver of checks circulating today are bill payments that a customer initiates electronically but that the financial institution ends up printing as a check because of delivery or remittance issues associated with their antiquated systems. Stern says these dropped checks total $1 trillion in payments a year, citing internal data gathered from large payment processors.

“A lot of times … when people want to send money to one to another and if the systems aren’t able to communicate, then the default is, ‘Okay, let’s just print the check and mail it,’” he says.

These dropped checks are vulnerable to theft, fraud and negative timing issues like late fees. He argues that the easiest way to remove checks from the payment system is for financial institutions to update or upgrade these systems that drop electronic payments into a check, rather than focus on individual customer or business behavior.